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CHAPTERS    OF    ERIE 


AND  OTHER  ESSAYS 


CHARLES   F.  ADAMS,  Jr.,  and  HENRY  ADAMS 


NEW   YORK 
HENRY    HOLT    AND    COMPANY 

1886 


iii\ 


Entered  according  to  Act  of  Congress,  in  the  year  1871, 

BY  JAMES  R.    OSGOOD  &  CO., 

in  the  Office  of  the  Librarian  of  Congress,  at  VVasliington. 


TROW't 

PRINTINO  AND  eOOKBINDINO  COMPANY, 

NtW  lORK. 


COE^TEI^TS. 


Page 
A  Chapter  of  Erie G.  F.  Adams,  Jr.   .    .     .      1 

The  New  York  Gold  Conspiracy    .    Henry  Adams   ....  100 

An  Erie  Raid C.  F.  Adams,  Jr.  .     .     .  135 

Captaine  John  Smith Henry  Adams   ....  192 

The  Bank  of  England  Restriction  .     Henry  Adams    ....  224 

British  Finance  in  1816     ....     Henry  Adams    ....  268 

The  Legal-Tender  Act.      Francis  A.  Walker  and  Henry  Adams  302 

The  Railroad  System C.  F.  Adams,  Jr. 

Chap.   I.    The  Era  of  Change 332 

II.    The  Transportation  Tax 355 

III.    Railroad  Consolidation 380 

IV      Stock  Watering 398 

V.    The  Government  and  the  Railroad  Corporations    .     .414 


A  CHAPTER  OF  ERIE.' 


"VTOT  a  generation  has  passed  away  during  the  last  six  hun- 
-LN  dred  years  without  cherishing  a  more  or  less  earnest  con- 
viction that,  through  its  efforts,  something  of  the  animal  had 
heen  eliminated  from  the  higher  type  of  man.  Probably,  also, 
no  generation  has  been  wholly  mistaken  in  nourishing  this 
faith  ;  —  even  the  worst  has  in  some  way  left  the  race  of  men 
on  earth  better  in  something  than  it  found  them.  And  yet  it 
would  not  be  difficult  for  another  Rousseau  to  frame  a  very  in- 
genious and  plausible  argument  in  support  of  the  opposite  view. 
Scratch  a  Russian,  said  the  first  Napoleon,  and  you  will  find  a 
Cossack ;  call  things  by  their  right  names,  and  it  would  be  no 
difficult  task  to  make  the  cunning  civilization  of  the  nineteenth 
century  appear  but  as  a  hypocritical  mask  spread  over  the 
more  honest  brutality  of  the  twelfth.  Take,  for  instance,  some 
of  the  cardinal  vices  and  abuses  of  the  imperfect  past.  Pirates 
are  commonly  supposed  to  have  been  battered  and  hung  out 
of  existence  when  the  Barbary  Powers  and  the  Buccaneers  of 
the  Spanish  Main  had  been  finally  dealt  with.  Yet  freebooters 
are  not  extinct ;  they  have  only  transferred  their  operations  to 
the  land,  and  conducted  them  in  more  or  less  accordance  with 
the  forms  of  law  ;  luitil,  at  last,  so  gi-eat  a  proficiency  have  they 
attained,  that  the  commerce  of  the  world  is  more  equally  but 
far  more  heavily  taxed  in  their  behalf,  than  would  ever  have 
entered  into  their  wildest  hopes  while,  outside  the  law,  they 
simply  made  all  comers  stand  and  deliver.     Now,  too,  they  no 

•  From  the  North  American  Review  for  Julv,  1869. 

1  A 


2  A   CHAPTER   OF  ERIE. 

longer  live  in  teiTor  of  the  rope,  skulking  in  the  hiding-place 
of  thieves,  but  flaunt  themselves  in  the  resorts  of  trade  and 
fashion,  and,  disdaining  such  titles  as  once  satisfied  Ancient 
Pistol  or  Captain  Macheath,  they  are  even  recognized  as  Presi- 
dent This  or  Colonel  That.  A  certain  description  of  gambling, 
also,  has  ceased  to  be  fashionable ;  it  is  years  since  Ci'ockford's 
doors  were  closed,  so  that  in  this  respect  a  victory  is  claimed 
for  advancing  civilization.  Yet  this  claim  would  seem  to  be 
unfounded.  Gambling  is  a  business  now  where  formerly  it 
was  a  disreputable  excitement.  Cheating  at  cards  was  always 
disgraceful ;  ti-ansactions  of  a  similar  character  under  the 
euphemistic  names  of  "operating,"  " cornering,"  and  the  like 
are  not  so  regarded.  Again,  legislative  bribery  and  corrup- 
tion were,  within  recent  memory,  looked  upon  as  antiquated 
misdemeanors,  almost  peculiar  to  the  unenlightened  period  of 
Walpole  and  Fox,  and  their  revival  in  the  face  of  modern  pub- 
lic opinion  was  thought  to  be  impossible.  In  this  regard  at 
least  a  sad  delusion  was  certainly  entertained.  Governments 
and  ministries  no  longer  buy  the  raw  material  of  legislation  ;  — 
at  least  not  openly  or  with  cash  in  hand.  The  same  cannot 
be  said  of  individuals  and  corporations  ;  for  they  have  of  late 
not  infrequently  found  the  supply  of  legislators  in  the  market 
even  in  excess  of  the  demand.  Judicial  venality  and  ruffian- 
ism on  the  bench  were  not  long  suice  traditions  of  a  remote 
past.  Bacon  was  impeached,  and  Jeffries  achieved  an  immor- 
tal infamy  for  offences  against  good  morals  and  common  de- 
cency which  a  self  satisfied  civilization  believed  incompatible 
with  modern  development.  Recent  revelations  have  cast 
more  than  doubt  upon  the  correctness  even  of  this  assimip- 
tion.* 

No  better  illustration  of  the  fantastic  disguises  which  the 
worst  and  most  familiar  evils  of  history  assume  as  they  meet 

•  See  n  very  striking  article  entitled  "  The  New  York  City  .ludicinry"  in 
the  North  Americiui  Review  for  July,  1867.  This  paper,  which,  from  its  fciir- 
less  denunciation  of  a  class  of  judicial  delinquencies  which  have  since  great- 
ly increased  both  in  frequency  and  in  magnitude,  attracted  great  attention 
when  It  was  published,  has  been  attributed  to  the  pen  of  Mr.  Thomas  Q. 
Shearman,  of  the  New  York  bar. 


A   CHAPTER   OF   ElUE.  6 

US  in  the  actual  movements  of  our  own  day  could  be  afforded 
than  was  seen  in  the  events  attending  what  are  known  as  the 
Erie  wars  of  the  year  1868.  Beginning  in  February  and  last- 
ing until  December,  raging  fiercely  in  the .  late  winter  and 
spring,  and  dying  away  into  a  hollow  truce  at  midsummer, 
only  to  revive  into  new  and  more  vigorous  life  in  the  autumn, 
this  strange  conflict  convulsed  the  money  market,  occupied 
the  courts,  agitated  legislatures,  and  perplexed  the  country, 
throughout  the  entire  year.  These,  too,  were  but  its  more  di- 
rect and  immediate  manifestations.  The  remote  political  com- 
plications and  financial  disturbances  occasioned  by  it  would 
aflbrd  a  curious  illustration  of  the  close  intertwining  of  inter- 
ests which  now  extends  throughout  the  civilized  world.  The 
complete  history  of  these  proceedings  cannot  be  written,  for 
the  end  is  not  yet ;  indeed,  such  a  history  probably  never  will 
be  written,  and  yet  it  is  still  more  probable  that  the  events  it 
would  record  can  never  be  quite  forgotten.  It  was  something 
new  to  see  a  knot  of  adventurers,  men  of  broken  fortune, 
■without  character  and  without  credit,  possess  themselves  of 
an  artery  of  commerce  more  important  than  was  ever  the 
Appian  Way,  and  make  levies,  not  only  upon  it  for  their  own 
emolument,  but,  through  it,  upon  the  whole  business  of  a 
nation.  Nor  could  it  fail  to  be  seen  that  this  was  by  no 
means  in  itself  an  end,  but  rather  only  a  beginning.  No  peo- 
ple can  afford  to  glance  at  these  things  in  the  columns  of  tlie 
daily  press,  and  then  dismiss  them  from  memor}^  For  Amer- 
icans they  involve  many  questions  ;  —  they  touch  very  nearly 
the  foundations  of  common  truth  and  honesty  without  which 
that  healthy  public  opinion  cannot  exist  which  is  the  life's 
breath  of  our  whole  political  system. 


A   CHAPTER   OF   ERIE. 


I. 


The  history  of  the  Erie  Railway  has  been  a  checkered  one. 
Chartered  in  1832,  and  organized  in  1833,  the  cost  of  its  con- 
struction was  then  estimated  at  three  millions  of  dollars,  of 
which  but  one  million  were  subscribed.  By  the  time  the  first 
report  was  made  the  estimated  cost  had  increased  to  six 
millions,  and  the  work  of  construction  was  actually  begun 
on  the  strength  of  stock  subscriptions  of  a  million  and  a 
half,  and  a  loan  of  three  millions  from  the  State,  la  1842 
the  estimated  cost  had  increased  to  twelve  millions  and  a  lialf, 
and  both  means  in  hand  and  credit  were  wholly  exhausted. 
Subscription-books  were  opened,  but  no  names  were  entered 
in  them ;  the  city  of  New  York  was  applied  to,  and  refused  a 
loan  of  its  credit ;  again  the  legislature  was  besieged,  but  the 
aid  from  this  quarter  was  now  hampered  with  inadmissible 
conditions  ;  accordingly  work  was  suspended,  and  the  property 
of  the  insolvent  corporation  passed  into  the  hands  of  assign- 
ees. In  1845  the  State  came  again  to  the  rescue;  it  surren- 
dered all  claim  to  the  three  millions  it  had  already  lent  to  the 
company  ;  and  one  half  of  their  old  subscriptions  having  been 
given  up  by  the  stockholders,  and  a  new  subscription  of  three 
millions  raised,  the  whole  property  of  the  road  was  mortgaged 
for  three  millions  more.  At  last,  in  1851,  eighteen  years  after 
its  commencement,  the  road  was  opened  from  Lake  Erie  to 
tide-water.  Its  financial  troubles  had,  however,  as  yet  only 
begim,  for  in  1859  it  could  not  meet  the  interest  on  its  mort- 
gages, and  passed  into  the  hands  of  a  receiver.  In  1861  an 
arrangement  of  interests  was  effected,  and  a  new  company 
was  organized.  Tlie  next  year  the  old  New  York  «fe  Erie  Rail- 
road Company  disa])peared  under  a  foreclosure  of  the  fifth 
mortgage,  and  the  present  Erie  Railway  Company  rose  from 
its  aahes.  Meanwhile  the  original  estimate  of  three  millions 
had  devcloj)ed  into  an  actual  outlay  of  fifty  millions  ;  the  470 
miles  of  track  opened  in  1842  had  expanded  into  773  miles  in 
1868 ;  and  the  revenue,  which  the  projectors  had  "  confident- 


A  CHAPTER   OF   ERIE.  5 

ly"  estimated  at  something  less  than  two  millions  in  1833, 
amounted  to  over  five  millions  when  the  road  passed  into  the 
hands  of  a  receiver  in  1859,  and  in  1865  reached  the  enor- 
mous sum  of  sixteen  millions  and  a  half.  The  road  was,  in 
truth,  a  magnificent  enterprise,  worthy  to  connect  the  great 
lakes  with  the  great  seaport  of  America.  Scaling  lofty  moun- 
tain ranges,  running  through  fertile  valleys  and  by  the  banks 
of  broad  rivers,  connecting  the  Hudson,  the  Susquehanna,  the 
St.  Lawrence,  and  the  Ohio,  it  stood  forth  a  monument  at 
once  of  engineering  skill  and  of  commercial  enterprise. 

The  series  of  events  in  the  Erie  history  which  culminated 
in  the  struggle  about  to  be  narrated  may  be  said  to  have  had 
its  origin  some  seventeen  or  eighteen  years  before,  when  Mr. 
Daniel  Drew  first  made  his  appearance  in  the  Board  of  Direc- 
tors, where  he  remained  down  to  the  year  1868,  generally 
holding  also  the  office  of  treasurer  of  the  corporation.  Mr. 
Drew  is  what  is  known  as  a  self-made  man.  Bom  in  the  year 
1797,  as  a  boy  he  drove  cattle  down  from  his  native  town  of 
Carmel,  in  Putnam  County,  to  the  market  of  New  York  City, 
and,  subsequently,  was  for  years  proprietor  of  the  Bull's  Head 
Tavern.  Like  his  contemporary,  and  ally  or  opponent,  —  as 
the  case  might  be,  —  Conielius  Vanderbilt,  he  built  up  his 
fortunes  in  the  steamboat  interest,  and  subsequently  extended 
his  operations  over  the  rapidly  developing  railroad  system. 
Shrewd,  unscrupulous,  and  very  illiterate,  —a  strange  com- 
bination of  superstition  and  faithlessness,  of  daring  and  tim- 
idity, —  often  good-natured  and  sometimes  generous,  —  he 
ever  regarded  his  fiduciary  position  of  director  in  a  railroad  as 
a  means  of  manipulating  its  stock  for  his  own  advantage. 
For  years  he  had  been  the  leading  bear  of  Wall  Street,  and 
his  favorite  haunts  were  the  secret  recesses  of  Erie.  As  treas- 
urer of  that  corporation,  he  had,  in  its  frequently  recun-ing 
hours  of  need,  advanced  it  sums  which  it  could  not  have  ob- 
tained elsewhere,  and  the  obtaining  of  which  was  a  necessity. 
He  had  been  at  once  a  good  friend  of  the  road  and  the  worst 
enemy  it  had  as  yet  known.  His  management  of  his  favorite 
stock  had  been  cunning  and  recondite,  and  his  wavs  inacru- 


6  A   CHAPTER    OF   ERIE.- 

table.  Those  who  sought  to  follow  him,  and  those  who  sought 
to  oppose  him,  alike  found  food  for  sad  reflection  ;  until  at  last 
he  won  for  himself  the  expressive  sobriquet  of  the  Speculative 
Director.  Sometimes,  though  rarely,  he  suffered  gi-eatly  in 
the  complications  of  Wall  Street ;  more  frequently  he  inflicted 
severe  damage  upon  others.  On  the  whole,  however,  his  for- 
tunes had  greatly  prospered,  and  the  outbreak  of  the  Erie 
war  found  him  the  actual  possessor  of  some  millions,  and  the 
reputed  possessor  of  many  more. 

In  the  spring  of  1866  Mr.  Drew's  manipulations  of  Erie 
culminated  in  an  operation  which  was  at  the  time  r^arded  as 
a  masterpiece ;  subsequent  experience  has,  however,  so  im- 
proved upon  it  that  it  is  now  looked  upon  as  an  ordinary  and 
inartistic  piece  of  what  is  called  "railroad  financiering,"  a 
class  of  operations  formerly  known  by  a  more  opprobrious 
name.  The  stock  of  the  road  was  then  selling  at  about  95, 
and  the  corporation  was,  as  usual,  in  debt,  and  in  pressing 
need  of  money.  As  usual,  also,  it  resorted  to  its  treasurer. 
Mr.  Drew  stood  ready  to  make  the  desired  advances  —  upon  se- 
curity. Some  twenty-eight  thousand  shares  of  its  own  author- 
ized stock,  which  had  never  been  issued,  were  at  the  time  in 
the  hands  of  the  company,  which  also  claimed,  under  the  stat- 
utes of  New  York,  the  right  of  raising  money  by  the  issue 
of  bonds,  convertible,  at  the  option  of  the  holder,  into  stock. 
The  twenty-eight  thoxisand  unissued  shares,  and  bonds  for 
three  milHons  of  dollars,  convertible  into  stock,  were  placed 
by  the  company  in  the  hands  of  its  treasurer,  as  security  for 
a  cash  loan  of  $  3,500,000.  The  negotiation  had  been  quietly 
effected,  and  Mr.  Drew's  campaign  now  opened.  Once  more 
ho  was  short  of  Eric.  While  Erie  was  buoyant,  —  while  it 
steadily  approximated  to  par,  —  while  speculation  was  ram- 
pant, and  that  outside  public^  the  delight  and  the  prey  of 
Wall  Street,  was  gradually  di-awn  in  by  the  fascination  of 
amassing  wealth  without  labor,  —  quietly  and  stealthily, 
through  his  Jigents  and  brokers,  the  grave,  desponding  opera- 
tor was  daily  concluding  his  contracts  for  the  future  delivery 
of  stock  at  current  prices.     At  last  the  hour  had  come.     Erie 


A  CHAPTER   OF   ERIE.  7 

was  rising,  Erie  was  scarce,  the  great  bear  had  many  contracts 
to  fulfil,  and  where  was  he  to  find  the  stock  1  His  victims 
were  not  kept  long  in  suspense.  Mr.  Treasurer  Drew  laid  his 
hands  upon  his  collateral.  In  an  instant  the  bonds  for  three 
millions  were  converted  into  an  equivalent  amount  of  capital 
stock,  and  fifty-eight  thousand  shares,  dumped,  as  it  were,  by 
the  cart-load  in  Broad  Street,  made  Erie  as  plenty  as  even 
Drew  could  desire.  Before  the  astonished  bulls  could  rally 
their  faculties,  the  quotations  had  fallen  from  95  to  50,  and 
they  realized  that  they  were  hopelessly  entrapped.* 

The  whole  transaction,  of  course,  was  in  no  respect  more 
creditable  than  any  result,  supposed  to  be  one  of  chance  or 
skill,  which,  in  fact,  is  made  to  depend  upon  the  sorthig 
of  a  pack  of  cards,  the  dosing  of  a  race-horse,  or  the  selling 
out  of  his  powers  by  a  "  walkist."  But  the  gambler,  the  pa- 
tron of  the  turf,  or  the  pedestrian  represents,  as  a  rule,  him- 
self alone,  and  his  character  is  generally  so  well  understood  as 

*  A  bull,  in  the  slang  of  the  stock  exchange,  is  one  who  endeavors  to  in- 
crease the  market  price  of  stocks,  as  a  bear  endeavors  to  depress  it.  The 
bull  is  supposed  to  toss  the  thing  up  with  his  horns,  and  the  bear  to  drag  it 
down  with  his  claws.  The  vast  majority  of  stock  operations  are  pure  gam- 
bling transactions.  One  man  agrees  to  deliver,  at  some  future  time,  property 
which  he  has  not  got,  to  another  man  who  does  not  care  to  own  it.  It  is  only 
one  way  of  betting  on  the  price  at  the  time  when  the  delivery  should  be  made; 
if  the  price  rises  in  the  mean  while,  the  bear  pays  to  the  bull  the  difference 
between  the  price  agreed  upon  and  the  price  to  which  the  property  has  risen; 
if  it  falls,  he  receives  the  difference  from  the  bull.  All  operations,  as  they  are 
termed,  of  the  stock  exchange  are  directed  to  this  depression  or  elevation  of 
stocks,  with  a  view  to  the  settlement  of  differences.  A  "  pool "  is  a  mere 
combination  of  men  contributing  money  to  be  used  to  this  end,  and  a  "  cor- 
ner "  is  a  result  arrived  at  when  one  combination  of  gamblers,  secretly  hold- 
ing the  whole  or  greater  part  of  any  stock  or  species  of  property,  induces 
another  combination  to  agree  to  deliver  a  large  further  quantity  at  some  future 
time.  When  the  time  arrives,  the  second  combination,  if  the  corner  succeeds, 
suddenly  finds  itself  unable  to  buy  the  amount  of  the  stock  or  property  ne- 
cessary to  enable  it  to  fulfil  its  contracts,  and  the  first  combination  fixes  at  its 
own  will  the  price  at  which  differences  must  be  settled.  The  corner  fails  or 
is  broken,  when  those  who  agree  to  deliver  succeed  in  procuring  the  stock  or 
property,  and  fulfilling  their  contracts.  The  argot  of  the  exchange  is,  how- 
ever, a  language-  by  itself,  and  very  difficult  of  explanation  to  the  wholly 
uninitiated.  It  can  onlj'  be  said  that  all  combinations  of  interests  and  manipu- 
lations of  values  are  mere  weapons  in  tlie  hands  of  bulls  and  bears  for  elevat- 
ing or  depressing  values,  with  a  view  to  the  payment  of  differences. 


8  A  CHAPTER   OF   EKIE. 

to  be  a  warning  to  all  the  world.  The  case  of  the  treasurer 
of  a  great  corporation  is  different.  He  occupies  a  fiduciary 
position.  He  is  a  trustee,  —  a  guardian.  Vast  interests  are 
confided  to  his  care ;  eveiy  shareholder  of  the  corporation  is 
his  ward  ;  if  it  is  a  raUroad,  the  community  itself  is  his  cestui 
que  trust.  But  passing  events,  accumulating  more  thickly 
with  every  year,  have  thoroughly  coiTupted  the  public  morals 
on  this  subject.  A  directorship  in  certain  great  corporations 
has  come  to  be  regarded  as  a  situation  in  which  to  make  a  for- 
tune, the  possession  of  which  is  no  longer  dishonorable.  The 
method  of  accumulation  is  both  simple  and  safe.  It  consists  in 
giving  contracts  as  a  trustee  to  one's  self  as  an  individual,  or 
in  speculating  in  the  property  of  one's  cestui  que  trust,  or  in 
using  the  funds  confided  to  one's  charge,  as  treasurer  or  other- 
wise, to  gamble  with  the  real  owners  of  those  funds  for  their 
own  property,  and  that  with  cards  packed  in  advance.  The 
wards  themselves  expect  their  guardians  to  throw  the  dice 
against  them  for  their  own  property,  and  are  surprised,  as  well 
as  gratified,  if  the  dice  are  not  loaded.  These  proceedings, 
too,  are  looked  upon  as  hardly  reprehensible,  yet  they  strike 
at  the  very  foundation  of  existing  society.  The  theory  of  rep- 
resentation, whether  in  politics  or  in  business,  is  of  the  essence 
of  modern  development.  Our  whole  system  rests  upon  the 
sanctity  of  the  fiduciary  relations.  Whoever  betrays  them,  a 
director  of  a  railroad  no  less  than  a  member  of  Congress  or 
the  trustee  of  an  orphans'  asylum,  is  the  common  enemy  of 
every  man,  woman,  and  child  who  lives  under  representative 
government.  The  unscrupulous  director  is  far  less  entitled  to 
mercy  than  the  ordinary  gambler,  combining  as  he  does  the 
character  of  the  traitor  with  the  acts  of  the  thief. 

No  acute  moral  sensibility  on  this  point,  however,  has  for  some 
years  troubled  Wall  Street,  nor,  indeed,  the  country  at  large. 
As  a  result  of  the  transaction  of  1866,  Mr.  Drew  was  looked 
upon  a.s  having  effected  a  surprisingly  clever  operation,  and  he 
retired  from  the  field  hated,  feared,  wealthy,  and  admired. 
This  episode  of  Wall  Street  history  took  its  place  as  a  bril- 
liant success  beside  the  famous  Prairie  du  Chieu  and  Harlem 


A   CHAPTER   OF   ERIE.  9 

"  corners,"  and,  but  for  subsequent  events,  would  soon  have 
been  forgotten.  Its  close  connection,  however,  with  more  im- 
portant though  later  incidents  of  Erie  history  seems  likely  to 
preserve  its  memory  fresh.  Great  events  were  impending  ;  a 
new  man  was  looming  up  in  the  railroad  world,  introducing 
novel  ideas  and  principles,  and  it  could  hardly  be  that  the 
new  and  old  w^ould  not  come  in  conflict.  Cornelius  Vander- 
bilt,  commonly  known  as  Commodore  Vanderbilt,  was  now  de- 
veloping his  theory  of  the  management  of  railroads. 

Born  in  the  year  1794,  Vanderbilt  was  a  somewhat  older 
man  than  Drew.  There  are  several  points  of  resemblance  in 
the  early  lives  of  the  two  men,  and  many  points  of  curious 
contrast  in  their  characters.  Vanderbilt,  like  Drew,  was  bom 
in  very  humble  circumstan'^es  in  the  State  of  New  York,  and 
like  him  also  received  little  education.  He  began  life  by  fer- 
rying passengers  and  produce  from  Staten  Island  to  New  York 
City.  Subsequently,  he  too  laid  the  foundation  of  his  gi-eat 
fortune  in  the  growing  steamboat  navigation,  and  likewise,  in 
due  coui-se  of  time,  transferred  himself  to  the  railroad  inter- 
est. When  at  last,  in  1868,  the  two  came  into  collision  as 
representatives  of  the  old  system  of  railroad  management  and 
of  the  new,  they  were  each  threescore  and  ten  years  of  age, 
and  had  both  been  successful-  in  the  accumulation  of  millions, 
—  Vanderbilt  even  more  so  than  Drew.  They  were  probably 
equally  imscrupulous  and  equally  selfish  ;  but,  while  tlie  cast 
of  Drew's  mind  was  sombre  and  bearish,  Vanderbilt  was  gay 
and  buoyant  of  temperament,  little  given  to  thoughts  other 
than  of  this  world,  a  lover  of  horses  and  of  the  good  things 
of  life.  The  first  affects  prayer-meetings,  and  the  last  is  a 
devotee  of  whist.  Drew,  in  Wall  Street,  is  by  temperament 
a  bear,  while  Vanderbilt  could  hardly  be  other  than  a  bull. 
Vanderbilt  must  be  allowed  to  be  by  far  the  superior  man  of 
the  two.  Drew  is  astute  and  full  of  resources,  and  at  all  times 
a  dangerous  opponent ;  but  Vanderbilt  takes  larger,  more 
comprehensive  views,  and  his  mind  has  a  vigorous  grasp  which 
that  of  Drew  seems  to  want.  AVhile,  in  short,  in  a  wider 
field,  the  one  might  have  made  himself  a  great  and  successful 
1* 


10  A   CHAPTER   OF   ERIE. 

despot,  the  other  would  hardly  have  aspired  beyond  the  con- 
trol of  the  jobbing  department  of  some  corrupt  government. 
Accordingly,  while  in  Drew's  connection  with  the  railroad  sys- 
tem his  operations  and  manipulations  evince  no  qualities  cal- 
culated to  excite  even  a  vulgar  admiration  or  respect,  it  is 
impossible  to  regard  Vanderbilt's  methods  or  aims  without  rec- 
ognizing the  magnitude  of  the  man's  ideas  and  conceding  his 
abilities.  He  involuntarily  excites  feelings  of  admiration  for 
himself  and  alarm  for  the  public.  His  ambition  is  a  great 
one.  It  seems  to  be  nothing  less  than  to  make  himself  mas- 
ter in  his  own  right  of  the  great  channels  of  communication 
which  connect  the  city  of  New  York  with  the  interior  of  the 
continent,  and  to  control  them  as  his  private  property.  Drew 
sought  to  carry  to  a  mean  perfection  the  old  system  of  operat- 
ing successfully  from  the  confidential  position  of  director,  nei- 
ther knowing  anything  nor  caring  anything  for  the  railroad  sys- 
tem, except  in  its  connection  with  the  movements  of  the  stock 
exchange,  and  he  succeeded  in  his  object.  Vanderbilt,  on  the 
other  hand,  as  selfish,  harder,  and  more  dangerous,  though  less 
subtle,  has  by  instinct,  rather  than  by  intellectual  effort,  seen 
the  full  magnitude  of  the  system,  and  through  it  has  sought 
to  make  himself  a  dictator  in  modern  civilization,  moving  for- 
ward to  this  end  step  by  step  with  a  sort  of  pitiless  energy 
which  has  seemed  to  have  in  it  an  element  of  fate.  As  trade 
now  dominates  the  world,  and  railways  dominate  trade,  his  ob- 
ject has  been  to  make  himself  the  virtual  master  of  all  by 
making  himself  absolute  lord  of  the  railways.  Had  he  begiui 
his  railroad  operations  with  this  end  in  view,  complete  failure 
would  have  been  almost  certainly  his  reward.  Commencing 
as  he  did,  however,  with  a  comparatively  insignificant  objec- 
tive point,  —  the  cheap  purchjise  of  a  bankrupt  stock,  —  and 
developing  his  ideas  as  he  advanced,  his  power  and  his  reputa- 
tion grew,  until  an  end  which  at  first  it  would  have  seemed 
madness  to  entertain  became  at  last  both  nat\iral  and  feasible. 
Two  great  lines  of  railway  traverse  the  State  of  New  York 
and  connect  it  with  the  West,  —  the  Erie  and  the  New  York 
Central.     The  latter  conununicates  with  the  city  by  a  great 


A   CHAPTER   OF   ERIE.  11 

river  and  by  two  railroads.  To  get  these  two  roads  —  the 
Harlem  and  the  Hudson  River  —  under  his  own  absolute  con- 
trol, and  then,  so  far  as  the  connection  with  the  Central  was 
concerned,  to  abolish  the  river,  was  Vanderbilt's  immediate 
object.  First  making  himself  master  of  the  Harlem  road,  he 
there  learned  his  early  lessons  in  railroad  management,  and 
picked  up  a  fortune  by  the  way.  A  few  years  ago  Harlem 
had  no  value.  As  late  as  1860  it  sold  for  eight  or  nine 
dollars  per  share;  and  in  January,  1863,  when  Vanderbilt 
had  got  the  control,  it  had  risen  only  to  30.  By  July  of 
that  year  it  stood  at  92,  and  in  August  was  suddenly  raised 
by  a  "corner"  to  179.  The  next  year  witnessed  a  similar 
operation.  The  stock  which  sold  in  January  at  less  than 
90  was  settled  for  in  June  in  the  neighborhood  of  285.  On 
one  of  these  occasions  Mr.  Drew  is  reported  to  have  con- 
tributed a  sum  approaching  half  a  million  to  his  rival's  wealth. 
More  recently  the  stock  had  been  floated  at  about  130.  It 
was  in  the  successful  conduct  of  this  first  experiment  that 
Vanderbilt  showed  his  very  manifest  superiority  over  previous 
railroad  managers.  The  Harlem  was,  after  all,  only  a  compet- 
ing line,  and  competition  was  proverbially  the  rock  ahead  in 
all  railroad  enterprise.  The  success  of  Vanderbilt  with  the 
Harlem  depended  upon  his  getting  rid  of  the  competition  of 
the  Hudson  River  railroad.  An  ordinary  manager  would 
have  resorted  to  contracts,  which  are  never  carried  out,  or  to 
opposition,  which  is  apt  to  be  ruinous.  Vanderbilt,  on  the 
contrary,  put  an  end  to  competition  by  buying  up  the  com- 
peting line.  This  he  did  at  about  par,  and,  in  due  course  of 
time,  the  stock  was  sent  up  to  180.  Thus  his  plans  had  de- 
veloped by  another  step,  while  through  a  judicious  course  of 
financiering  and  watering  and  dividing,  a  new  fortune  had 
been  secured  by  him.  By  thistinie  Vanderbilt's  reputation  as 
a  railroad  manager  —  as  one  who  earned  dividends,  created 
stock,  and  invented  wealth  —  had  become  very  great,  and  the 
managers  of  the  Central  brought  that  road  to  him,  and  asked 
him  to  do  with  it  as  he  had  done  with  the  Harlem  and  Hud- 
son River,     He  accepted  the  proffered  charge,  and  now,  prob- 


12  A   CHAPTER   OF   ERIE. 

ably,  the  possibilities  of  his  position  and  the  magnitude  of 
the  prize  within  his  grasp  at  last  dawned  on  his  mind.  Un- 
consciously to  himself,  working  more  wisely  than  he  knew,  he 
had  developed  to  its  logical  conclusion  one  potent  element  of 
modern  civilization. 

Gravitation  is  the  nile,  and  centralization  the  natural  con- 
scqiience,  in  society  no  less  than  in  physics.  Physically,  mor- 
ally, intellectually,  in  population,  wealth,  and  intelligence,  all 
things  tend  to  concentration.  One  singular  illustration  of  this 
law  is  almost  entirely  the  growth  of  this  century-.  Formerly, 
either  governments,  or  individuals,  or,  at  most,  small  combina- 
tions of  individuals,  were  the  originators  of  all  great  w^orks 
of  public  utility.  Within  the  present  century  only  has  de- 
mocracy found  its  way  through  the  representative  system  into 
the  combinations  of  capital,  small  shareholders  combining  to 
can'y  out  the  most  extensive  enterprises.  And  yet  already 
our  great  corporations  are  fost  emancipating  themselves  from 
the  State,  or  rather  subjecting  the  State  to  their  own  control, 
while  individual  capitalists,  who  long  ago  abandoned  the  at- 
tempt to  compete  with  them,  will  next  seek  to  control  them. 
In  this  dangerous  path  of  centralization  Vanderbilt  has  taken 
the  latest  step  in  advance.  He  has  combined  the  natural 
power  of  the  individual  with  the  factitious  power  of  the  cor- 
poration. The  famous  "  L'dtat,  c'est  moi  "  of  Louis  XIV.  rep- 
resents Vanderbilt's  position  in  regard  to  his  railroads.  Un- 
consciously he  him  introduced  (\esarism  into  corporate  life. 
He  has,  however,  but  pointed  out  the  way  which  othere  will 
tread.  The  individual  will  hereafter  be  engrafted  on  the  cor- 
poration, —  democracy  nmning  its  course,  and  resulting  in  im- 
perialism ;  and  Vanderbilt  is  but  the  precursor  of  a  class  of 
men  who  will  wield  within  the  State  a  power  created  by  the  State, 
but  too  great  for  its  control.     He  is  the  founder  of  a  dynasty. 

From  the  moment  Vanderbilt  stejiped  into  the  management 
of  the  Central,  l)ut  a  single  effort  seemed  necessary  to  give 
the  new  railroad  king  absolute  control  over  the  railroad  sys- 
tem, and  consequently  over  the  commerce,  of  New  Ycrk.  By 
advancing  only  one  step  he  could  securely  levy  his  tolls  on 


A   CHAPTER   OF   ERIE.  13 

the  traffic  of  a  continent.  Nor  could  this  step  have  seemed 
difficult  to  take.  It  was  but  to  repeat  with  the  Erie  his  suc- 
cessful operation  with  the  Hudson  River  road.  Not  only  was 
it  a  step  easy  to  take,  but  here  again,  as  so  many  times  before, 
a  new  fortune  seemed  ready  to-  drop  into  his  hand.  The  Erie 
might  well  yield  a  not  less  golden  harvest  than  the  Central, 
Hudson  River,  or  Harlem.  There  was  indeed  but  one  obsta- 
cle in  the  way,  —  the  plan  might  not  meet  the  views  of  the 
one  man  who  at  that  time  possessed  the  wealth,  cunning, 
and  combination  of  qualities  which  could  defeat  it,  that  man 
being  the  Speculative  Director  of  the  Erie,  —  Mr.  Daniel 
Drew. 

The  New  York  Central  passed  into  Vanderbilt's  hands  in 
the  winter  of  1866  -  67,  and  he  marked  the  Erie  for  his  own 
in  the  succeeding  autumn.  As  the  annual  meeting  of  the  cor- 
poration approached,  three  parties  were  found  in  the  field  con- 
tending for  control  of  the  road.  One  party  was  represented 
by  Drew,  and  might  be  called  the  partjr  in  possession,  that 
which  had  long  ruled  the  Erie,  and  made  it  what  it  was,  — 
the  Scarlet  Woman  of  Wall  Street.  Next  came  Vanderbilt, 
flushed  with  success,  and  bent  upon  fully  gratifying  his  great 
instinct  for  developing  imperialism  in  corporate  life.  Lastly, 
a  faction  made  its  appearance  composed  of  some  shrewd  and 
ambitious  Wall  Street  operators  and  of  certain  persons  from 
Boston,  who  sustained  for  the  occasion  the  novel  character  of 
railroad  reformers.  This  party,  it  is  needless  to  say,  was  as 
imscrupulous,  and,  as  the  result  proved,  as  able  as  either  of 
the  others  ;  it  represented  nothing  but  a  raid  made  upon  the 
Erie  treasury  in  the  interest  of  a  thoroughly  bankrupt  New 
England  corporation,  of  which  its  members  had  the  control. 
The  history  of  this  corporation,  known  as  the  Boston,  Hart- 
ford, &  Erie  Railroad,  --a  projected  feeder  and  connection  of 
the  Erie,  —  wovdd  be  one  curious  to  read,  though  verj^  difficult 
to  write.  Its  name  was  synonymous  with  bankruptcy,  litiga- 
tion, fraud,  and  failure.  If  the  Erie  was  of  doubtful  repute 
in  Wall  Stj-eet,  the  Boston,  Hartford,  &  Erie  had  long  been 
of  worse  than  doubtful  repute  in  State  Street.     Of  late  years, 


14  A   CHAPTER   OF   EKIE, 

under  able  and  persevering,  if  not  scrupulous  management, 
the  bankrupt,  moribund  company  had  been  slowly  struggling 
into  new  life,  and  in  the  spring  of  1867  it  had  obtained,  un- 
der certain  conditions,  from  the  Commonwealth  of  Massachu- 
setts, a  subsidy  in  aid  of  the  construction  of  its  road.  One 
of  the  conditions  imposed  obliged  the  corporation  to  raise  a 
sum  from  other  sources  still  larger  than  that  granted  by  the 
State.  Accordingly,  those  having  the  line  in  charge  looked 
abroad  for  a  victim,  and  fixed  their  eyes  upon  the  Erie. 

As  the  election  day  drew  near,  Erie  was  of  course  for  sale. 
A  controlling  interest  of  stockholders  stood  ready  to  sell  their 
proxies,  with  entire  impartiality,  to  any  of  the  three  contend- 
ing parties,  or  to  any  man  who  would  pay  the  market  price  for 
them.  Nay,  more,  the  attorney  of  one  of  the  contending  par- 
ties, as  it  afterwards  appeared,  after  an  ineffectual  effoi't  to 
extort  black  mail,  actually  sold  the  proxies  of  his  principal  to 
another  of  the  contestants,  and  his  doing  so  seemed  to  excite 
mirth  rather  than  surprise.  Meanwhile  -the  representatives 
of  the  Eastern  interest  played  their  part  to  admiration.  Tak- 
ing advantage  of  some  Wall  Street  complications  just  then  ex- 
isting between  Vanderbilt  and  Drew,  they  induced  the  former 
to  ally  himself  with  them,  and  the  latter  saw  that  his  defeat 
was  inevitable.  Even  at  this  time  the  Vanderbilt  party  con- 
templated haying  recourse,  if  necessary,  to  the  courts,  and  a 
petition  for  an  injunction  had  been  prepared,  setting  forth  the 
details  of  the  "comer"  of  1866.  On  the  Simday  preceding 
the  election  Drew,  in  view  of  his  impending  defeat,  called 
upon  V^anderbilt.  That  gentleman,  thereupon,  very  amicably 
read  to  him  the  legal  documents  prepared  for  his  benefit ; 
whereupon  the  ready  treasurer  at  once  turned  about,  and, 
having  hitherto  been  hampering  the  Commodore  by  his  bear 
operations,  he  now  agreed  to  join  hands  with  him  in  giving  to 
the  market  a  strong  upward  tendency.  Meanwhile  the  other 
parties  to  the  contest  were  not  idle.  At  the  same  house,  at  a 
later  hour  in  the  day,  Vanderbilt  explained  to  the  Eastern  ad- 
venturers his  new  plan  of  operations,  which  included  the  con- 
tinuance of  Drew  in  his  directorship.     These  gentlemen  were 


A   CHAPTER   OF   ERIE.  15 

puzzled,  not  to  say  confounded,  by  this  sudden  change  of  front. 
An  explanation  was  demanded,  some  "plain  language  followed, 
and  the  parties  separated,  leaving  everything  unsettled  ;  but 
only  to  meet  again  at  a  later  hour  at  the  house  of  Drew. 
There  Vanderbilt  brought  the  new  men  to  terms  by  proposing 
to  Drew  a  bold  amp  de  main,  calculated  to  throw  them  entire- 
ly out  of  the  direction.  Before  the  parties  separated  that 
night  a  written  agreement  had  been  entered  into,  providing 
fhat,  to  save  appearances,  the  new  board  should  be  elected 
without  Drew,  but  that  immediately  thereafter  a  vacancy 
should  be  created,  and  Drew  chosen  to  fill  it.  He  was  there- 
fore to  go  in  as  one  of  two  directors  in  the  Vanderbilt  interest, 
that  gentleman's  nephew,  Mr.  Work,  being  the  other. 

This  programme  was  faithfully  carried  out,  and  on  the  2d 
of  October  Wall  Street  was  at  once  astonished  by  the  news  of 
the  defeat  of  the  notorious  leader  of  the  bears,  and  bewildered 
by  the  immediate  resignation  of  a  member  of  the  new  board 
and  the  election  of  Drew  in  his  place.  Apparently  he  had 
given  in  his  submission,  the  one  obstacle  to  success  was  re- 
moved, and  the  ever-victorious  Commodore  had  now  but  to 
close  his  fingers  on  his  new  prize.  Virtual  consolidation  in 
the  Vanderbilt  interest  seemed  a  foregone  conclusion. 

The  reinstalment  of  Drew  was  followed  by  a  period  of  hol- 
low truce.  A  combination  of  capitalists,  in  pursuance  of  au 
arrangement  already  referred  to,  took  advantage  of  this  to 
transfer  as  much  as  possible  of  the  spare  cash  of  the  "  outside 
public  "  from  its  pockets  to  their  own.  A  "  pool  "  was  formed, 
in  view  of  the  depressed  condition  of  Erie,  and  Drew  was  left 
to  manipulate  the  market  for  the  advantage  of  those  whom 
it  might  concern.  The  result  of  the  Speculative  Director's 
operations  supplied  a  curious  commentary  on  the  ethics  of  the 
stock  exchange,  and  made  it  questionable  whether  the  ancient 
adage  as  to  honor  among  a  certain  class  in  society  is  of  uni- 
versal application,  or  confined  to  its  more  persecuted  members. 

One  contributor  to  the  "  pool,"  in  this  instance,  was  Mr. , 

a  Triend  of  Vanderbilt.  The  ways  of  Mr.  Drew  were,  as  usual, 
past  finding  out ;  Mr.  .  however,  grew  imoatient  of  wait- 


16  A   CHAPTEK   OF   ERIE. 

ing  foi'  the  anticipated  rise  in  Erie,  and  it  occiuTed  to  him 
that,  besides  participating  in  the  profits  of  the  "  pool,"  he 
might  as  well  tnrn  an  honest  penny  by  collateral  operations 
on  his  own  account,  looking  to  the  expected  rise.  Before  em- 
barking on  his  independent  venture,  however,  he  consulted 
Mr.  Drew,  it  is  said,  who  entirely  declined  to  express  any 
judgment  as  to  the  enterprise,  but  at  the  same  time  agreed  to 
loan  Mr. out  of  the  "  pool "  any  moneys  he  might  re- 
quire npon  the  security  usual  in  such  cases.     Mr. availecf 

himself  of  the  means  thus  put  at  his  disposal,  and  laid  in 
a  private  stock  of  Erie.  Still,  however,  the  expected  rise 
did  not  take  place.  Again  he  applied  to  Mr.  Drew  for  infor- 
mation, but  with  no  better  success  than  before  ;  and  again, 
tempted  by  the  cheapness  of  Erie,  he  borrowed  further  funds 
of  the  "  pool,"  and  made  new  purchases  of  stock.  At  last 
the  long-continued  depression  of  Erie  aroused  a  dreadful  sus- 
picion in  the  bull  operator,  and  inquiries  were  set  on  foot. 
He  then  discovered,  to  his  astonishment  and  horror,  that  his 
stock  had  come  to  him  through  certain  of  the  brokers  of  Mr. 
Drew.  The  members  of  the  "  pool  "  were  at  once  called  to- 
gether, and  Mr.  Drew  was  appealed  to  on  behalf  of  Mr.  . 

It  was  suggested  to  him  that  it  would  be  well  to  run  Erie  up 
to  aid  a  confederate.  Thereupon,  with  all  the  coolness  imag- 
inable, Mr.  Drew  announced  that  the  "  pool  "  had  no  Erie  and 
wanted  no  Erie  ;  that  it  had  sold  out  its  Eric  and  had  real- 
ized large  profits,  which  ho  now  proposed  to  divide.  There- 
after who  could  pretend  to  imderstand  Daniel  Drew  1  who  could 
fail  to  appreciate  the  humors  of  Wall  Street  1  The  controller 
of  the  "  pool  "  had  actually  lent  the  money  of  the  "  pool "  to 
one  of  the  members  of  the  "  pool,"  to  enable  him  to  buy  up 
the  stock  of  the  "  pool  "  ;  and  having  thus  quietly  saddled 
him  with  it,  the  controller  proceeded  to  divide  the  profits, 
and  calmly  retiimed  to  the  victim  a  portion  of  his  own  money 

us  his  share  of  the  proceeds.     Yet,  strange  to  say,  Mr. 

wholly  failed  to  sec  the  hinnorous  side  of  the  transaction,  and 
actually  feigned  great  indignation. 

This,  however,  was  a  mere  sportive  interlude  between  tlic 


A   CHAPTER   OF   ERIE.  17 

graver  scenes  of  the  drama.  The  real  conflict  was  now  im- 
pending. Commodore  Vanderbilt  stretched  out  his  hand  to 
grasp  Erie.  Erie  was  to  be  isolated  and  shut  up  within  the 
limits  of  New  York  ;  it  was  to  be  given  over,  bound  hand  and 
foot,  to  the'lord  of  the  Central.  To  perfect  this  programme, 
the  representatives  of  all  the  competing  lines  met,  and  a  prop- 
osition was  submitted  to  the  Erie  party  looking  to  a  practi- 
cal consolidation  on  certain  terms  of  the  Pennsylvania  Central, 
the  Erie,  and  the  New  York  Central,  and  a  division  among  the 
contracting  parties  of  all  the  earnings  from  the  New  York 
City  travel.  A  new  illustration  was  thus  to  be  afforded,  at 
the  expense  of  the  trade  and  travel  to  and  from  the  heart  of 
a  continent,  of  George  Stephenson's  famous  aphorism,  that 
where  combination  is  possible  competition  is  impossible.  The 
Erie  party,  however,  represented  that  their  road  earned  more 
than  half  of  the  fund  of  which  they  were  to  receive  only  one 
third.  They  remonstrated  and  proposed  modifications,  but 
their  opponents  were  inexorable.  The  terms  were  too  hard  ; 
the  conference  led  to  no  result ;  a  ruinous  competition  seemed 
impending  as  the  alternative  to  a  fierce  war  of  doubtful  issue. 
Both  parties  now  retired  to  their  camps,  and  mustered  their 
forces  in  preparation  for  the  first  overt  act  of  hostility.  They 
had  not  long  to  wait. 

Vanderbilt  was  not  accustomed  to  failure,  and  in  this  case 
the  sense  of  treachery,  the  bitter  consciousness  of  having 
been  outwitted  in  the  presence  of  all  Wall  Street,  gave  a  pe- 
culiar sting  to  the  rebuff.  A  long  succession  of  victories  had 
intensified  his  natiiral  arrogance,  and  he  was  by  no  means  dis- 
posed, even  apart  from  the  failure  of  his  cherished  plans,  to 
sit  down  and  nurse  an  impotent  wrath  in  presence  of  an  in- 
jured prestige.  Foiled  in  intrigue,  he  must  now  have  recourse 
to  his  favorite  weapon,  —  the  brute  force  of  his  millions.  He 
therefore  prepared  to  go  out  into  Wall  Street  in  his  might, 
and  to  make  himself  master  of  the  Erie,  as  before  he  had 
made  himself  master  of  .the  Hudson  River  road.  The  task 
in  itself  was  one  of  magnitude.  The  volume  of  stock  was 
immense  ;  all  of  it  was  upon  the  street,  and  the  necessary  ex- 

B 


18  A    CHAPTER    OF    KRIK. 

peuditure  involved  many  millions  of  dollars.  The  peculiar 
difficulty  of  the  task,  however,  lay  in  the  fact  that  it  had  to 
be  undertaken  in  the  face  of  antagonists  so  bold,  so  subtle,  so 
iinscnipulous,  so  thoroughly  acquainted  with  Erie,  as  well  as 
so  familiar  with  all  the  devices  and  tricks  of  fence  of  Wall 
Street,  as  were  those  who  now  stood  ready  to  take  up  the 
gage  which  the  Commodore  so  arrogantly  threw  down. 

The  first  open  hostilities  took  place  on  the  17th  of  Feb- 
ruary. For  some  time  Wall  Street  had  been  agitated  with 
forebodings  of  the  coming  hostilities,  but  not  until  that  day 
was  recourse  had  to  the  courts.  Vanderbilt  had  two  ends  in 
view  when  he  sought  to  avail  himself  of  the  processes  of  law. 
In  the  fii'st  place,  Drew's  long  connection  with  Erie,  and  espe- 
cially the  unsettled  transactions  arising  out  of  the  famous 
corner  of  1866,  afforded  admirable  ground  for  aimoying  offen- 
sive operations  ;  and,  in  the  second  place,  these  very  proceed- 
ings, by  throwing  his  opponent  on  the  defensive,  afforded  an 
excellent  cover  for  Vanderbilt's  own  transactions  in  Wall 
Street.  It  was  essential  to  his  success  to  corner  Drew,  but  to 
comer  Drew  at  all  was  not  easy,  and  to  corner  him  in  Erie 
■was  difficult  indeed.  Very  recent  experiences,  of  which  Van- 
derbilt was  fully  informed,  no  less  than  the  memories  of  1 866, 
had  fully  warned  the  public  how  manifold  and  ingenious  were 
the  expedients  through  which  the  cunning  treasurer  furnished 
himself  with  Erie,  when  the  exigencies  of  his  position  de- 
manded fresh  supplies.  It  was,  therefore,  very  necessary  for 
Vanderbilt  that  he  should,  while  buying  Erie  with  one  hand 
in  Wall  Street,  with  the  other  close,  so  far  as  he  could,  that 
apparently  inexhaustiV)le  spring  from  which  such  generous 
supplies  of  new  stock  were  wont  to  flow.  Accordingly,  on 
the  17th  of  February,  Mr.  Frank  Work,  the  only  remaining 
representative  of  tlie  Vanderbilt  faction  in  the  Erie  direction, 
accompanied  by  Mr.  Vanderbilt's  attorneys,  Messrs.  Rapallo 
and  Spenser,  made  his  appearance  before  Judge  Barnard,  of 
the  Supreme  Court  of  New  York,  then  sitting  in  chambers, 
and  ajjplied  for  an  injunction  against  Treasurer  Drew  and  his 
brother  directors,  of  the  Erie  Railway,  restraining  them  from 


A   CHAPTER   OF   ERIE.  19 

the  payment  of  interest  or  principal  of  the  tnree  and  a  half 
millions  bon-owed  of  the  treasurer  in  1866,  as  well  as  from 
releasing  Drew  from  any  liability  or  cause  of  action  the  com- 
pany might  have  against  him,  pending  an  investigation  of  his 
accounts  as  treasurer ;  on  the  other  hand,  Drew  was  to  be  en- 
joined from  taking  any  legal  steps  towards  compelling  a  settle- 
ment. A  temporary  injunction  was  granted  in  accordance 
with  the  petition,  and  a  further  hearing  was  assigned  for  the 
21st.  Two  days  later,  however,  —  on  the  19th  of  the  month, 
—  without  waiting  for  the  result  of  the  first  attack,  the  same 
attorneys  appeared  again  before  Judge  Barnard,  and  now  in 
the  name  of  the  people,  acting  through  the  Attorney-General, 
petitioned  for  the  removal  from  office  of  Treasurer  Drew.  The 
papers  in  the  case  set  forth  some  of  the  difficulties  which  be- 
set the  Commodore,  and  exposed  the  existence  of  a  new  foun- 
tain of  Erie  stock.  It  appeared  that  there  was  a  recently  en- 
acted statute  of  New  York  which  authorized  any  railroad  com- 
pany to  create  and  issue  its  own  stock  in  exchange  for  the 
stock  of  any  other  road  under  lease  to  it.  The  petition  then 
alleged  that  Mr,  Drew  and  certain  of  his  brother  directors, 
had  quietly  possessed  themselves  of  a  worthless  road  connect- 
ing with  the  Erie,  and  called  the  Buffalo,  Bradford,  &  Pittsburg 
Kailroad,  and  had  then,  as  occasion  and  their  own  exigencies 
required,  proceeded  to  supply  themselves  with  whatever  Erie 
stock  they  wanted,  by  leasing  their  own  road  to  the  road  of 
which  they  were  directors,  and  then  creating  stock  and  issuing 
it  to  themselves,  in  exchange,  under  the  authority  vested  in 
them  by  law.  The  imcontradicted  history  of  this  transaction, 
as  subsequently  set  forth  on  the  very  doubtful  authority  of 
a  leading  Erie  director,  affords,  indeed,  a  most  happy  illustra- 
tion of  brilliant  railroad  financiering,  whether  true  in  this 
case  or  not.  The  road,  it  was  stated,  cost  the  purchasers,  as 
financiers,  some  $  250,000  ;  as  proprietors,  they  then  issued 
in  its  name  bonds  for  two  million  dollars,  payable  to  one  of 
themselves,  who  now  figured  as  trustee.  This  person,  then, 
shifting  his  character,  drew  up,  as  counsel  for  both  parties,  a 
contract  leasing  this  road  to  the  Erie  Railway  for  four  hun- 


20  A    CHAPTER    OF   ERIE. 

dred  and  uinety-uiue  years,  the  Erie  agreeing  to  assume  the 
bonds ;  reappearing  iu  their  original  character  of  Erie  direc- 
tors, these  gentlemen  then  ratified  the  lease,  and  thereafter 
it  only  remained  for  them  to  relapse  into  the  role  of  financiers, 
and  to  divide  the  proceeds.  All  this  wjis  happily  accomplished, 
and  the  Erie  Railway  lost  and  some  one  gained  $  1-10,000  a 
year  by  the  bargain.  The  skilful  actors  in  this  much-shift- 
ing drama  probably  proceeded  on  the  familiar  theory  that 
exchange  is  no  robbery ;  and  the  expedient  was  certainly 
ingenious. 

Such  is  the  story  of  this  proceeding  as  told  under  oath  by 
one  who  must  have  known  the  whole  truth.  That  the  facts 
are  correctly  set  forth  by  no  means  follows.  Indeed,  many 
parts  of  this  narrative  are  open  to  this  criticism.  The  evi- 
dence on  which  it  is  founded  may  be  sufficiently  clear,  but  un- 
fortunately the  witnesses  are  not  seldom  wholly  unworthy  of 
credence.  The  formality  of  an  oath  may  accompany  plausible 
statements  without  giving  to  them  the  slightest  additional 
weight.  In  this  case  the  sworn  allegations  were  made,  and 
they  implicated  certain  respectable  men  ;  it  can  only  be  said 
of  them  that  their  falsehood  is  not  patent,  and  that  they  are 
thoroughly  in  character  with  other  tmnsactions  known  to  be 
true.  If  the  facts  of  the  case  were  correctly  stated,  or  had  in 
them  an  element  of  truth,  it  is  difficult  to  see  what  fiduciary 
relation  these  directors,  as  trustees,  did  not  violate.  How- 
ever this  may  be,  it  is  indisputable  that  the  supply  of  Erie  on 
the  market  had  been  largely  increased  from  the  source  indi- 
cated, and  Commodore  Vanderbilt  naturally  desired  to  put 
some  limit  to  the  amount  of  the  stock  in  existence,  a  majority 
of  which  he  sought  to  control.  Accordingly  it  was  now  fur- 
ther ordered  by  Mr.  Justice  Barnard  that  Mr.  Drew  should 
show  cause  on  the  21st  why  the  prayer  of  the  petitioner 
should  not  be  gi-anted,  and  meanwhile  he  was  temporarily 
suspended  from  his  position  as  treasurer  and  director. 

It  was  not  until  the  3d  of  March,  however,  that  any  deci- 
sive action  was  taken  by  Judge  Barnard  on  either  of  the  peti- 
tions before  him.     Even  then,  that  in  the  name  of  the  Attor- 


A   CHAPTER    OF   KRIE.  21 

ney-General  was  postponed  for  final  hearing  until  the  10th  of 
the  month  ;  but,  on  the  application  of  Work,  an  injunction  was 
issued  restraining  the  Erie  board  from  any  new  issue  of  capital 
stock,  by  conversion  of  bonds  or  otherwise,  in  addition  to  the 
251,058  shfu-es  appearing  in  the  pi-evious  reports  of  the  road, 
and  forbidding  the  guaranty  by  the  Erie  of  the  bonds  of  any 
connecting  line  of  road.  While  this  last  provision  of  the 
order  was  calculated  to  funiish  food  for  thought  to  the  Boston 
party,  matter  for  meditation  was  supplied  to  Mr.  Drew  by 
other  claiises,  which  specially  forbade  him,  his  agents,  attor- 
neys, or  brokers,  to  have  any  transactions  in  Erie,  or  fulfil  any 
of  bis  contracts  already  entered  into,  until  he  had  returned  to 
the  company  sixty-eight  thousand  shares  of  capital  stock,  al- 
leged to  be  the  number  involved  in  the  xmsettled  transaction 
of  1866,  and  the  more  recent  Biiftalo,  Bradford,  &  Pittsburg 
exchange.  A  final  hearing  was  fixed  for  the  10th  of  March  on 
both  injunctions. 

Things  certainly  did  not  now  promise  well  for  Treasurer 
Drew  and  the  bear  party.  Vanderbilt  and  the  bulls  seemed 
to  aiTange  everything  to  meet  their  own  views ;  apparently 
they  had  but  to  ask  and  it  was  granted.  If  any  virtue  ex- 
isted in  the  processes  of  law,  if  any  authority  was  wielded  by 
a  New  York  court,  it  now  seemed  as  if  the  very  head  of  the 
bear  faction  must  needs  be  converted  into  a  bull  in  his  own 
despite,  and  to  his  manifest  ruin.  He,  in  this  hour  of  his 
trial,  was  to  be  forced  by  his  triumphant  opponent  to  make 
Erie  scarce  by  returning  into  its  treasury  sixty-eight  thousand 
shares,  —  one  fourth  of  its  whole  capital  stock  of  every  de- 
scription. So  far  from  manufacturing  fresh  Erie  and  pouring 
it  into  the  street,  he  was  to  be  cornered  by  a  writ,  and  forced 
to  work  his  own  ruin  in  obedience  to  an  injunction.  Appear- 
ances are,  however,  provei'bially  deceptive,  and  all  depended  on 
the  assumption  that  some  virtue  did  exist  in  the  processes  of 
law,  and  that  some  authority  was  wielded  by  a  New  York 
court.  In  spite  of  the  threatening  aspect  of  his  affairs,  it 
was  very  evident  that  the  nerves  of  Mr.  Drew  and  his  asso- 
ciates were  not  seriously  affected.     Wall  Street  watched  him 


22  A    CHAPTER    OF    ERIE. 

with  curiosity  not  unmiiigled  with  alarm  ;  for  this  was  a  con- 
flict of  Titans.  Hedged  all  around  with  orders  of  the  court, 
suspended,  enjoined,  and  threatened  with  all  manner  of  un- 
heai'd-of  processes,  with  Vanderbilt's  wealth  standing  like  a 
lion  in  his  path,  and  all  Wall  Street  ready  to  turn  upon  him 
and  rend  him,  —  in  presence  of  all  these  accumulated  terrors 
of  the  court-room  and  of  the  exchange,  the  Speculative 
Director  was  not  less  speculative  than  was  his  wont.  He 
seemed  rushing  on  destruction.  Day  after  day  he  pursued  the 
same  "  short  "  *  tactics ;  contract  after  contract  was  put  out  for 
the  future  delivery  of  stock  at  current  prices,  and  this,  too,  in 
the  face  of  a  continually  rising  market.  Evidently  he  did  not 
yet  consider  himself  at  the  end  of  his  resources. 

It  was  equally  evident,  however,  that  he  had  not  much  time 
to  lose.  It  was  now  the  3d  of  March,  and  the  anticipated 
"  comer "  might  be  looked  for  about  the  10th.  As  usual, 
some  light  skirmishing  took  place  as  a  prelude  to  the  heavy 
shock  of  decisive  battle.  The  Erie  party  very  freely  and 
openly  expressed  a  decided  lack  of  respect,  and  something 
approaching  contempt,  for  the  purity  of  that  particular  frag- 
ment of  the  judicial  ermine  which  was  supposed  to  adorn  the 
person  of  Mr.  Justice  Barnard.  They  did  not  pretend  to  con- 
ceal their  conviction  that  this  magistrate  was  a  piece  of  the 
Vandcrbilt  property,  and  they  very  plainly  announced  their 
intention  of  seeking  for  justice  elsewhere.  With  this  end  in 
view  they  betook  themselves  to  their  own  town  of  Bingham- 
ton,  in  the  county  of  Broome,  where  they  duly  presented 
themselves  before  Mr.  Justice  Balcom,  of  the  Supreme  Court. 
The  existing  judicial  system  of  New  York  divides  the  State 
into  eight  distinct  districts,  each  of  which  has  an  independent 
Supreme  Court  of  four  judges,  elected  by  the  citizens  of  that 
district.  The  first  district  alone  enjoys  five  judges,  the  fifth 
being  the  Judge  Bsu-nard  already  refcired  to.  These  local 
judges,  however,  are  clothed  with  certain  equity  powers  in 
actions  commenced  before  them,   which  run  throughout  the 

•  An  operator  is  snid  to  bo"  short "  when  he  lins  agreed  to  deliver  that 
which  he  has  not  got.    He  wagers,  in  fact,  on  n  fall. 


A   CHAPTER    OF   ERIE.  23 

State.  As  one  subject  of  litigation,  therefore,  might  affect 
many  individuals,  each  of  whom  might  initiate  legal  proceed- 
ings before  any  of  the  thirty-three  judges ;  which  judge, 
again,  might  forbid  proceedings  before  any  or  all  of  the  other 
judges,  or  issue  a  stay  of  proceedings  in  suits  already  com- 
menced, and  then  proceed  to  make  orders,  to  consolidate 
actions,  and  to  issue  process  for  contempt,  —  it  was  not  im- 
probable that,  sooner  or  later,  strange  and  disgraceful  conflicts 
of  authority  would  arise,  and  that  the  law  would  fall  into  con- 
tempt. Such  a  system  can,  in  fact,  be  sustained  only  so  long- 
as  co-ordinate  judges  use  the  delicate  powers  of  equity  with  a 
careful  regard  to  private  rights  and  the  dignity  of  the  law, 
and  therefore,  more  than  any  which  has  ever  been  devised, 
it  calls  for  a  high  average  of  learning,  dignity,  and  personal 
character  in  the  occupants  of  the  bench.  When,  therefore, 
the  ermine  of  the  judge  is  flung  into  the  kennel  of  party 
politics  and  becomes  a  part  of  the  spoils  of  political  victory  ; 
when  by  any  chance  partisanship,  brutality,  and  corruption 
become  the  qualities  which  especially  recommend  the  success- 
ful aspirant  to  judicial  honors,  then  the  system  described  will 
be  found  to  furnish  peculiar  facilities  for  the  display  of  these 
characteristics. 

Taking  advantage  of  the  occasion  this  system,  so  simple  in 
theory,  so  complicated  in  practice,  afforded  for  creating  com- 
plications by  obtaining  conflicting  orders  from  co-ordinate 
judges,  the  Erie  party  broke  ground  in  a  new  suit.  The  in- 
junction was  no  sooner  asked  of  Judge  Balcom  than  it  was 
granted,  and  Mr.  Frank  Work,  the  Attorney-General,  and  all 
other  parties  litigant,  were  directed  to  show  cause  at  Cortland- 
ville  on  the  7th  of  March  ;  and,  meanwhile,  Mr.  Director 
Work,  accused  of  being  a  spy  in  the  councils  of  Erie,  was 
temporarily  suspended  from  his  position,  and  all  proceedings 
in  the  suits  commenced  before  Judge  Barnard  were  stayed. 
The  moment,  however,  this  order  became  known  in  New  York, 
a  new  suit  was  commenced  by  the  Vanderbilt  interest  in  the 
name  of  Richard  Schell ;  an  urban  judge  cried  check  to  the 
move  of  the  rural  judge,  by  forbidding  any  meeting  of  the 


24  A    CIIAPTEK    OF   ERIE. 

Erie  board,  or  the  transaction  of  auy  business  by  it,  unless 
Director  Work  was  at  full  liberty  to  participate  therein.  The 
first  move  of  the  Drew  faction  did  not  seem  likely  to  result  in 
any  signal  advantage  to  its  car.se. 

All  this,  however,  was  mere  skirmishing,  and  now  the  deci- 
sive engiigement  was  near  at  hand.  The  plans  of  the  Erie 
ring  were  matured,  and,  if  Commodore  Vanderbilt  w^anted  the 
stock  of  their  road,  they  were  prepared  to  let  him  have  all  he 
desired.  As  usual  the  Erie  treasury  was  at  this  time  deficient 
in  funds.  As  usual,  also,  Daniel  Drew  stood  ready  to  advance 
all  the  funds  required  —  on  proper  security.  One  kind  of  se- 
curity, and  only  one,  the  company  was  disposed  at  this  time  to 
offer,  —  its  convertible  bonds  luider  a  pledge  of  conversion. 
The  company  could  not  issue  stock  outright,  in  any  case,  at 
less  than  par ;  its  bonds  bore  interest,  and  were  useless  on  the 
street ;  an  issue  of  convertible  bonds  was  another  name  for 
an  issue  of  stock  to  be  sold  at  market  rates.  The  treasurer 
readily  agreed  to  find  a  purchaser,  and,  in  fiict,  he  himself 
stood  just  then  in  pressing  need  of  some  scores  of  thousands 
of  shai-es.  Already  at  the  meeting  of  the  Board  of  Directors, 
on  the  19th  of  February,  a  very  deceptive  account  of  the  con- 
dition of  the  road,  jockied  out  of  the  general  superintendent, 
had  been  read  and  made  public  ;  the  increased  depot  facilities, 
the  projected  double  track,  and  the  everlasting  steel  rails,  had 
been  made  to  do  vigorous  duty  ;  and  the  board  had,  in  the 
vaguest  and  most  general  language  conceivable,  clothed  the 
Executive  Committee  with  full  power  in  the  premises.*     Im- 

•  This  vote  of  the  Board  of  Directors  of  the  Erie  Railway  Company  was 
the  sole  authority  under  which,  without  further  consultation  with  the  board, 
the  stock  of  the  road  was  increased  four  hundred  and  fifty  thousand  shares. 
It  was  worded  as  follows:  — 

"  It  being  necessary  for  the  finishing,  complethig,  and  operating  the  road  of 
the  company,  to  borrow  money, 

"  Retolved,  That  under  the  provisions  of  the  statute  authorizing  the  loan  of 
money  for  such  purposes,  the  Executive  Committee  be  authorized  to  borrow 
such  sum  as  may  be  necessary,  and  to  issue  therefor  such  security  as  is  pro- 
Tided  for  in  such  cases  by  the  laws  of  this  State;  and  that  the  president  and 
secretary  bo  authorized,  under  the  seal  of  the  company,  to  execute  all  needful 
and  ])roppr  agreements  and  uiidertakinjrs  for  such  |)urpose." 

The  law  referred  to  was  Subdivision  10  of  Section  28  of  the  Geueral  Rail- 


A   CHAPTER   OF   ERIE.  25 

mediately  after  the  Board  of  Directors  adjourned  a  meeting 
of  the  Execiitive  Committee  was  held,  and  a  vote  to  issue  at 
once  convertible  bonds  for  ten  millions  gave  a  meaning  to  the 
very  ambiguous  language  of  the  directors'  resolve  ;  and  thus, 
when  apparently  on  the  very  threshold  of  his  final  triumph, 
this  mighty  mass  of  one  himdred  thousand  shares  of  new 
stock  was  hanging  like  an  avalanche  over  the  head  of  Vander- 
bilt. 

The  Executive  Committee  had  voted  to  sell  the  entire 
amount  of  these  bonds  at  not  less  than  72^.  Five  millions 
were  placed  upon  the  market  at  once,  and  Mr.  Drew's  broker 
became  the  purchaser,  Mr.  Drew  giving  him  a  written  guar- 
anty against  loss,  and  being  entitled  to  any  profit.  It 
was  all  done  in  ten  minutes  after  the  committee  adjourned,  — - 
the  bonds  issued,  their  conversion  into  stock  demanded  and 
complied  with,  and  certificates  for  fifty  thousand  shares  depos- 
ited in  the  broker's  safe,  subject  to  the  orders  of  Daniel  Drew. 
There  they  remained  until  the  29th,  when  they  were  issued, 
on  his  requisition,  to  certain  others  of  that  gentleman's  army 
of  brokers,  much  as  ammimition  might  be  issued  before  a  gen- 
eral engagement.  Three  days  later  came  the  Barnard  injunc- 
tion, and  Erie  suddenly  rose  in  the  market.  Then  it  was 
determined  to  bring  up  the  reserves  and  let  the  eager  bulls 
have  the  other  five  millions.    The  history  of  this  second  issue 

road  Act  of  1850,  which  authorized  the  raih'oad  companies  to  which  it  applied 
"  to  borrow  such  sums  of  money  as  may  be  necessary  for  completing,  finishing, 
and  operating  the  road  ";  to  mortgage  their  roads  as  security  for  such  loans; 
and  to  "  confer  on  any  holder  of  any  bond  issued  for  money  borrowed  as  afore- 
said, the  right  to  convert  the  principal  due  or  owing  thereon  into  stock  of  said 
company,  at  any  time,  not  exceeding  ten  years  from  the  date  of  the  bond, 
under  such  regulations  as  the  directors  may  see  fit  to  adopt." 

It  was  an  open  question  whether  this  law  applied  at  all  to  the  Erie  Railway 
Company,  the  amount  of  the  capital  stock  of  which  was  otherwise  regulated 
bylaw;  the  bonds  were  issued  and  sold,  not  as  bonds,  but  with  a  distinct 
pledge  of  immediate  conversion  into  stock,  and  as  an  indirect  way  of  doing 
that,  the  direct  doing  of  which  was  clearly  illegal ;  finally,  as  a  matter  of  fact, 
the  proceeds  of  these  bonds  were  not  used  for  "  completing,  finishing,  or  oper- 
ating the  road."  As  a  matter  of  law  the  question  is  of  no  interest  outside  of 
New  York,  and  is  as  yet  undecided  there.  Of  the  good  faith  and  morality  of 
the  transaction  but  one  opinion  exists  anywhere. 
2 


26  A   CHAPTER   OF   ERIE. 

was,  in  all  respects,  an  episode  worthy  of  Erie,  and  deserves 
minute  relation.  It  was  decided  upon  on  the  3d,  but  before  the 
bonds  were  converted  Barnard's  injunction  had  been  served  on 
every  one  connected  with  the  Erie  Road  or  with  Daniel  Drew. 
The  10th  was  the  return  day  of  the  writ,  but  the  Erie  opera- 
tors needed  even  less  time  for  their  deliberations.  Monday, 
the  9th,  was  settled  upon  as  the  day  upon  which  to  defeat  the 
impending  "  corner."  The  night  of  Saturday,  the  7th,  was  a 
busy  one  in  the  Erie  camp.  While  one  set  of  counsel  and 
clerks  were  preparing  affidavits  and  prayers  for  strange  writs 
and  injunctions,  the  enjoined  vice-president  of  the  road  was  busy 
at  home  signing  certificates  of  stock,  to  be  ready  for  instant 
use  in  case  a  modification  of  the  injunction  could  be  obtained, 
and  another  set  of  counsel  was  in  immediate  attendance  on 
the  leaders  themselveu.  Mr.  Groesbeck,  the  chief  of  the  Drew 
brokers,  being  himself  enjoined,  secured  elsewhere,  after  one 
or  two  failures,  a  purchaser  of  the  bonds,  and  took  him  to  the 
house  of  the  Erie  counsel,  where  Drew  and  other  directors  and 
brokers  then  were.  There  the  terms  of  the  nominal  sale  were 
agreed  upon,  and  a  contract  was  drawn  up  transferring  the 
bonds  to  this  man  of  straw,  who  in  return  gave  Mr.  Drew  a 
full  power  of  attorney  to  convert  or  otherwise  dispose  of  the 
bonds,  in  the  form  of  a  promissory  note  for  their  purchase- 
money  ;  Mr.  Groesbeck,  meanwhile,  with  the  fear  of  injunctions 
before  his  eyes,  prudently  withdrew  into  the  next  room,  and 
amused  himself  by  looking  at  the  curiosities  and  conversing 
with  the  lawyers'  young  gentlemen.  After  the  contract  was 
closed,  the  purchaser  was  asked  to  sign  an  affidavit  setting 
forth  his  ownership  of  the  bonds  and  the  refusal  of  the  cor- 
pomtion  to  convert  them  into  stock  in  compliance  with  their 
contract,  upon  which  affidavit  it  was  in  contemplation  to  seek 
from  some  justice  a  writ  of  mandamus  to  compel  the  Erie 
Railway  to  convert  them,  the  necessary  papers  for  such  a  pro- 
ceeding being  then  in  course  of  preparation  elsewhere.  This 
the  purchaser  declined  to  do.  One  of  the  lawyers  present 
then  said  :  "  Well,  you  can  make  the  demand  now  ;  here  is 
Mr.  Drew,  the  treasurer  of  the  company,  and  Mr.  Gould,  one 


A   CHAPTER   OF  ERIE.  27 

of  the  Executive  Committee."  In  accordance  with  this  sug- 
gestion a  demand  for  the  stock  was  then  made,  and,  of  course, 
at  once  refused ;  thereupon  the  scruples  of  the  man  of  straw 
being  all  removed,  the  desired  affidavit  was  signed.  All  busi- 
ness now  being  finished,  the  parties  separated ;  the  legal 
papers  were  ready,  the  convertible  bonds  had  been  disposed 
of,  and  the  certificates  of  stock,  for  which  they  were  to  be 
exchanged,  were  signed  in  blank  and  ready  for  delivery. 

Early  Monday  morning  the  Erie  people  were  at  work.  Mr. 
Drew,  the  director  and  treasurer,  had  agreed  to  sell  on  that 
day  fifty  thousand  shares  of  the  stock,  at  80,  to  the  firms  of 
which  Mr.  Fisk  and  Mr.  Gould  were  members,  these  gentle- 
men also  being  Erie  directors  and  members  of  the  Executive 
Committee.  The  new  certificates,  made  out  in  the  names  of 
these  firms  on  Saturday  night,  were  in  the  hands  of  the  sec- 
retary of  the  company,  who  was  strictly  enjoined  from  allow- 
ing their  issue.  On  Monday  morning  this  official  directed  an 
employee  of  the  road  to  carry  these  books  of  certificates  from 
the  West  Street  office  of  the  company  to  the  transfer  clerk  in 
Pine  Street,  and  there  to  deliver  them  carefully.  The  mes- 
senger left  the  room,  but  immediately  returned  empty-handed, 
and  informed  the  astonished  secretary  that  Mr.  Fisk  had  met 
him  outside  the  door,  taken  from  him  the  books  of  unissued 
certificates,  and  "  run  away  with  them."  It  was  true  ;  —  one 
essential  step  towards  conversion  had  been  taken  ;  the  certifi- 
cates of  stock  were  beyond  the  control  of  an  injunction.  Dur- 
ing the  afternoon  of  the  same  day  the  convertible  bonds  were 
found  upon  the  secretary's  desk,  where  they  had  been  placed 
by  Mr.  Belden,  the  partner  in  business  of  Director  James  Fisk, 
Jr.  ;  the  certificates  were  next  seen  in  Broad  Street. 

Before  launching  the  bolt  thus  provided,  the  conspirators 
had  considered  it  not  unadvisable  to  cover  their  proceedings, 
if  they  could,  with  some  form  of  law.  This  probably  was 
looked  upon  as  an  idle  ceremony,  but  it  could  do  no  harm ; 
and  perhaps  their  next  step  was  dictated  by  what  has  been 
called  "a  decent  respect  for  the  opinions  of  mankind,"  com- 
bined with  a  profound  contempt  for  judges  i,nd  courts  of 
law. 


28  A   CHAPTER   OF   ERIE. 

Early  on  the  morning  of  the  9th  Judge  Gilbert,  a  highly- 
respected  magistrate  of  the  Second  Judicial  District,  residing 
in  Brooklyn,  was  waited  upon  by  one  of  the  Erie  counsel,  who 
desired  to  initiate  before  him  a  new  suit  in  the  Erie  litigation, 

—  this  time,  in  the  name  of  the  Saturday  evening  purchaser  of 
bonds  and  maker  of  affidavits.  A  writ  of  mandmmis  was  asked 
for.  This  writ  clearly  did  not  lie  in  such  a  case  ;  the  magistrate 
very  properly  declin3d  to  grant  it,  and  the  only  wonder  is  that 
counsel  should  have  applied  for  it.  New  coimsel  were  then 
hun-iedly  summoned,  and  a  new  petition,  in  a  fresh  name,  was 
presented.  This  petition  was  for  an  injunction,  in  the  name 
of  Belden,  the  partner  of  Mr.  Fisk,  and  the  documents  then 
and  there  presented  were  probably  as  eloquent  an  exposure  as 
could  possibly  have  been  penned  of  the  lamentable  condition 
into  which  the  once  honored  judiciary  of  New  York  had  fallen. 
The  petition  alleged  that  some  time  in  February  certain  per- 
sons, among  whom  was  especially  named  George  G.  Barnard, 

—  the  justice  of  the  Supreme  Court  of  the  First  District,  — 
had  entered  into  a  combination  to  speculate  in  the  stock  of 
the  Erie  Railway,  and  to  use  the  process  of  the  courts  for  the 
purpose  of  aiding  their  speculation ;  "  and  that,  in  further- 
ance of  the  plans  of  this  combination,"  the  actions  in  Work's 
name  had  been  commenced  before'  Barnard,  who,  the  counsel 
asserted,  was  then  issuing  injunctions  at  the  rate  of  half  a 
dozen  a  day.  It  is  impossible  by  any  criticism  to  do  justice 
to  such  audacity  Jis  this  :  the  dumb  silence  of  amazement  is 
the  only  fitting  commentary.  Apparently,  however,  nothing 
that  coidd  be  stated  of  his  colleague  across  the  river  exceeded 
the  belief  of  Judge  Gilbert,  for,  after  some  trifling  delays  and 
a  few  objections  on  the  part  of  the  judge  to  the  form  of  the 
desired  order,  the  Erie  counsel  hiirried  away,  and  returned  to 
New  York  with  a  new  injunction,  restraining  all  the  parties  to 
nil  the  other  suits  from  further  proceedings,  and  from  doing 
any  acts  in  '*  furtherance  of  said  conspiracy  "  ;  —  in  one  para- 
graph ordering  the  Erie  directors,  except  Work,  to  continue 
in  the  discharge  of  their  duties,  in  direct  defiance  of  the  in- 
junction of  one  judge,  and  in  tlic  next,  with  an  equal  disre- 


A  CHAPTER   OF  ERIE.  29 

gard  of  another  judge,  forbidding  the  directors  to  desist  from 
converting  bonds  into  stock.  Judge  Gilbert  having,  a  few 
hours  before  signing  this  wonderful  order,  refused  to  issue  a 
writ  of  mandamus,  it  may  be  proper  to  add  that  the  process 
of  equity  here  resorted  to,  compelling  the  performance  of 
various  acts,  is  of  recent  invention,  and  is  known  as  a  "  man- 
datory injunction." 

All  was  now  ready.  The  Drew  party  were  enjoined  in 
every  direction.  One  magistrate  had  forbidden  them  to  move, 
and  another  magistrate  had  ordered  them  not  to  stand  still. 
If  the  Erie  board  held  meetings  and  transacted  business,  it 
violated  one  injunction  ;  if  it  abstained  from  doing  so,  it  vio- 
lated another.  By  the  further  conversion  of  bonds  into  stock 
pains  and  penalties  would  be  incurred  at  the  hands  of  Judge 
Barnard  ;  the  refusal  to  convert  would  be  an  act  of  disobedi- 
ence to  Judge  Gilbert.  Strategically  considered,  the  position 
could  not  be  improved,  and  Mr.  Drew  and  his  friends  were 
not  the  men  to  let  the  golden  moment  escape  them.  At  once, 
before  a  new  injunction  could  be  obtained,  even  in  New  York, 
fifty  thousand  shares  of  new  Erie  stock  were  flung  vipon  the 
market.  That  day  Ei'ie  was  buoyant,  —  Vanderbilt  was  pur- 
chasing. His  agents  caught  at  the  new  stock  as  eagerly  as  at 
the  old,  and  the  whole  of  it  was  absorbed  before  its  origin 
was  suspected,  and  almost  without  a  falter  in  the  price.  Then 
the  fi'esh  certificates  appeared,  and  the  truth  became  known. 
Eric  had  that  day  opened  at  80  and  risen  rapidly  to  83,  while 
its  rise  even  to  par  was  predicted  ;  suddenly  it  faltered,  fell 
off,  and  then  dropped  suddenly  to  71.  Wall  Street  had  never 
been  subjected  to  a  greater  shock,  and  the  market  reeled  to  and 
fro  like  a  dnmken  man  between  these  giants,  as  they  hurled 
about  shares  by  the  tens  of  thousands,  and  money  by  the  mil- 
lion. When  night  piit  an  end  to  the  conflict,  Erie  stood  at 
78,  the  shock  of  battle  was  over,  and  the  astonished  brokers 
drew  breath  as  they  waited  for  the  events  of  the  morrow. 
The  attempted  "  corner  "  was  a  failure,  and  Drew  was  victo- 
rious,—  no  doubt  existed  on  that  point.  The  question  now 
was,  could  Vanderbilt  sustain  himself?     In  spite  of  all  his 


30  A   CHAPTER   OF   ERIE. 

wealth,  must  he  not  go  down  before  his  cunning  oppo- 
nent ]  ^ 

The  morning  of  the  11th  found  the  Erie  leaders  still  trans- 
acting business  at  the  office  of  the  corporation  in  West  Street. 
It  would  seem  that  these  gentlemen,  in  spite  of  the  glaring 
contempt  for  the  process  of  the  courts  of  which  they  had  been 
guilty,  had  made  no  arrangements  for  an  orderly  retreat  be- 
yond the  jurisdiction  of  the  tribunals  they  had  set  at  defiance. 
They  were  speedily  roused  from  their  real  or  affected  tranquil- 
lity by  trustworthy  intelligence  that  processes  for  contempt 
were  already  issued  against  them,  and  that  their  only  chance 
of  escape  from  incarceration  lay  in  precipitate  flight.  At  ten 
o'clock  the  astonished  police  saw  a  throng  of  panic-stricken 
railway  directors  —  looking  more  like  a  frightened  gang  of 
thieves,  disturbed  in  the  division  of  their  plunder,  than  like 
the  wealthy  representatives  of  a  great  corporation  —  rush 
hefidlong  from  the  doors  of  the  Erie  office,  and  dash  ofi"  in  the 
direction  of  the  Jersey  ferry.  In  their  hands  were  packages 
and  files  of  papers,  and  their  pockets  were  crammed  with 
assets  and  securities.  One  individual  bore  away  with  him  in 
a  hackney-coach  bales  containing  six  millions  of  dollars  in 
greenbacks.  Other  members  of  the  board  followed  under 
cover  of  the  night ;  some  of  them,  not  daring  to  expose  them- 
selves to  the  publicity  of  a  ferry,  attempted  to  cross  in  open 
boats  concealed  by  the  darkness  and  a  March  fog.  Two  di- 
rectors, who  lingered,  were  an-ested  ;  but  a  majority  of  the  Ex- 
ecutive Committee  collected  at  the  Erie  Station  in  Jersey  City, 
and  there,  free  from  any  apprehension  of  Judge  Barnard's 
pursuing  wrath,  proceeded  to  tlie  transaction  of  business. 

Meanwhile,  on  the  other  side  of  the  river,  Vandcrbilt  was 
struggling  in  the  toils.  As  usual  in  these  Wall  Street  opera- 
tions, there  was  a  grim  luunor  in  the  situation.  Had  Vandcr- 
bilt failed  to  sustiUM  tlie  inarkot,  a  financial  collapse  and  panic 
must  have  ensued  wliiclj  would  have  scut  him  to  the  wall.  He 
had  sustained  it,  and  had  absorbed  a  hundred  tliousatid  shares 
of  Eiie.  Thus  when  Drew  retired  to  Jersey  City  ho  carried 
with  him  seven  millions  of  his  opponent's  money,   and  the 


A   CHAPTKR   OF   ERIE.  31 

Commodore  had  freely  supplied  the  enemy  with  the  sinews  of 
war.  He  had  gi'asped  at  Erie  for  his  own  sake,  and  now  his 
opponents  derisively  promised  to  rehabilitate  and  vivify  the 
old  road  with  the  money  he  had  furnished  them,  so  as  more  ef- 
fectually to  compete  with  the  lines  which  he  already  possessed. 
Nor  was  this  all.  Had  they  done  as  they  loudly  claimed 
they  meant  to  do,  Vauderbilt  might  have  hugged  himself  in 
the  faith  that,  after  all,  it  was  but  a  question  of  time,  and  the 
prize  would  come  to  him  in  the  end.  He,  however,  knew  well 
enough  that  the  most  pressing  need  of  the  Erie  people  was 
money  with  which  to  fight  him.  With  this  he  had  now  fur- 
nished them  abundantly,  and  he  must  have  felt  that  no  scru- 
ples Avould  prevent  their  use  of  it. 

Vanderbilt  had,  however,  little  leisure  to  devote  to  the  en- 
joyment of  the  humorous  side  of  his  position.  The  situation 
Avas  alarming.  His  opponents  had  carried  with  them  in  their 
flight  seven  millions  in  currency,  which  were  withdrawn  from 
circulation.  An  artificial  stringency  was  thus  created  in  Wall 
Street,  and,  while  money  rose,  stocks  fell,  and  imusual  mar- 
gins were  called  in.  Vanderbilt  was  carrying  a  fearful  load, 
and  the  least  want  of  confidence,  the  faintest  sign  of  faltering, 
might  well  bring  on  a  crash.  He  already  had  a  hundred 
thousand  shares  of  Erie,  not  one  of  which  he  could  sell.  He 
was  liable  at  any  time  to  bo  called  upon  to  carry  as  much 
more  as  his  opponents,  skilled  by  long  practice  in  the  manu- 
facture of  the  article,  might  see  fit  to  produce.  Opposed  to 
him  were  men  who  scrupled  at  nothing,  and  who  knew  every 
in  and  out  of  the  money  market,  With  every  look  and  every 
gesture  anxiously  scrutinized,  a  position  more  trying  than  his 
can  hardly  be  conceived.  It  is  not  known  from  what  source 
he  drew  the  vast  sums  which  enabled  him  to  surmount  his 
difficulties  with  such  apparent  ease.  His  nerve,  however, 
stood  him  in  at  least  as  good  stead  as  his  financial  resources. 
Like  a  gi'eat  general,  in  the  hour  of  trial  he  insj)ired  confi- 
dence. While  fighting  for  life  he  could  "  talk  horse  "  and  play 
whist.  The  manner  in  which  he  then  emerged  from  his  trou- 
bles, serene  and  confident,  was  as  extraordinary  as  the  finan- 
cial resources  he  commanded. 


o2  A   CHAPTER   OF   ERIE. 

Meanwhile,  before  turning  to  the  tide  of  battle,  which  now 
swept  away  from  the  courts  of  law  into  the  halls  of  legisla- 
tion, there  are  two  matters  to  be  disposed  of;  the  division  of 
the  spoils  is  to  be  recounted,  and  the  old  and  useless  lumber 
of  conflict  must  be  cleared  away.  The  division  of  profits 
accruing  to  Mr.  Treasurer  Drew  and  his  associate  directors, 
acting  as  individuals,  was  a  fit  conclusion  to  the  stock  issue 
just  described.  The  bonds  for  five  millions,  after  their  con- 
version, realized  nearly  four  millions  of  dollars,  of  which 
$  3,025,000  passed  into  the  treasury  of  the  company.  The 
trustees  of  the  stockholders  had  therefore  in  this  case  secm-ed 
a  profit  for  some  one  of  $375,000.  Confidence  in  the  good 
faith  of  one's  kind  is  very  commendable,  but  possession  is 
nine  points  of  the  law.  Mr.  James  Fisk,  Jr.,  through  whom 
the  sales  were  mainly  effected,  declined  to  make  any  payments 
in  excess  of  the  $  3,625,000,  until  a  division  of  profits  was 
agreed  upon.  It  seems  that,  by  virtue  of  a  paper  signed  by 
Mr.  Drew  as  early  as  the  19th  of  February,  Gould,  Fisk,  and 
others  were  entitled  to  one  half  the  profits  he  should  make 
"  in  certain  transactions."  What  these  transactions  were,  or 
whether  the  official  action  of  Directors  Gould  and  Fisk  was  in 
any  way  influenced  by  the  signing  of  this  document,  does  not 
appear.  Mr.  Fisk  now  gave  Mr.  Drew,  in  lieu  of  csish,  his 
uncertified  check  for  the  surplus  $  375,000  remaining  from 
this  transaction,  with  stock  as  collateral  amounting  to  about 
the  half  of  that  sum.  With  this  settlement,  and  the  redemp- 
tion of  the  collateral,  Mr.  Drew  was  fain  to  be  content. 
Seven  months  afterwards  ho  still  retained  possession  of  tho 
uncertified  check,  in  the  payment  of  which,  if  presented,  he 
seemed  to  entertain  no  great  confidence.  Everything,  how- 
ever, showed  conclusively  tho  advantage  of  operating  from 
interior  lines.  While  the  Erie  treasury  was  once  more  replete, 
three  of  the  persons  who  had  been  mainly  instrumental  in 
filling  it  had  not  sufTercd  in  the  transaction.  Tlie  troasin*er 
was  richer  by  S  180,000  directly,  and  he  himself  only  knew 
by  how  nuich  more  incidentally.  In  like  manner  his  faithful 
adjutants  hod   profited   to   au   amount   as  much   exceeduig 


A  CHAPTER   OF  ERIE.  33 

{jf  60,000  each   as   their   sagacity  had   led   them   to   provide 
for. 

The  useless  lumber  of  conflict,  consisting  chiefly  of  the  nu- 
merous judges  of  the  Supreme  Court  of  New  York  and  their 
conflicting  processes  of  law,  must  next  be  disposed  of.  Judge 
Gilbert  was  soon  out  of  the  field.  His  process  had  done  its 
work,  and  the  Erie  counsellors  hardly  deigned  upon  the  18th, 
which  was  the  day  fixed  for  showing  cause,  to  go  over  to 
Brooklyn  and  listen  to  indignant  denunciations  on  the  part  of 
their  Vanderbilt  brethren,  as,  with  a  very  halting  explanation 
of  his  hasty  action,  Jiidge  Gilbert  peremptorily  denied  the 
request  for  further  delay,  and  refused  to  continue  his  injunc- 
tion. It  is  due  to  this  magistrate  to  say,  that  he  is  one  of  the 
most  respected  in  the  State  of  New  York  ;  and  when  that  is 
said,  much  is  implied  in  the  facts  already  stated  as  to  his 
opinion  of  some  of  his  brother  judges.  Judicial  demoraliza- 
tion can  go  no  further.  If  Judge  Gilbert  was  out  of  the  fray, 
however.  Judge. Barnard  was  not.  The  wrath  and  indignation 
of  this  curious  product  of  a  system  of  elective  judiciaiy  can- 
not be  described,  nor  were  they  capable  of  utterance.  They 
took  strange  forms  of  expression.  At  one  time  he  sent  all  the 
papers  relating  to  the  alleged  conspiracy  down  to  the  grand 
jury,  and  apparently  sought  thereby  to  indicate  that  he  courted 
an  investigation.  The  prosecuting  attorneys,  however,  better 
instructed  in  the  law,  seem  to  have  doubted  whether  a  matter 
which  was  the  proper  subject  for  a  legislative  impeachment 
could  satisfactorily  be  brought  before  a  petty  jury  on  an  in- 
dictment, and  did  not  pursue  the  investigation.  Then,  at  a 
later  day,  the  judge  mysteriously  intimated  that  the  belief 
of  both  the  counsel  and  the  affiants  in  the  truth  of  the 
charges  contained  in  the  complaint  before  Judge  Gilbert  was 
then  a  matter  of  investigation  before  a  criminal  body,  to  see 
whether  or  not  it  constituted  perjury.  Finally,  a  heavy  col- 
lection of  counter-affidavits  piu-ified  the  judicial  skirts  from 
their  taint,  but  not  until  fresh  and  more  aggravated  grounds 
for  indignation  had  presented  themselves.  It  is  unnecessary 
to  go  into  the  details  of  the  strange  and  revolting  scenes  which 

2*  0 


34  A   CHAPTER   OF   ERIE. 

the  next  few  months  witnessed  in  the  rooms  of  the  Supreme 
Court.  They  read  like  some  monstrous  pai'ody  of  the  forms 
of  law ;  some  Saturnalia  of  bench  and  bar.  The  magistrate 
became  more  partisan  than  were  the  paid  advocates  before 
him,  and  all  seemed  to  vie  with  one  another  in  their  efforts  to 
bring  their  common  profession  into  public  contempt.  Day 
and  night  detectives  in  the  pay  of  suitors  dogged  the  steps  of 
the  magistrate,  and  their  sworn  affidavits,  filed  in  his  own 
court,  sought  to  implicate  him  in  an  attempt  to  kidnap  Drew 
by  means  of  armed  ruffians,  and  to  bring  the  fugitive  by  vio- 
lence within  reach  of  his  process.  Then,  in  retaliation,  the 
judge  openly  avowed  from  the  bench  that  his  spies  had  pene- 
trated into  the  consultations  of  the  litigants,  and  he  aston- 
ished a  witness  by  angi-ily  inteiTogating  him  as  to  an  affidavit 
reflecting  upon  himself,  to  which  that  witness  had  declined  to 
make  oath.*     At  one  moment  he  wept,  as  counsel  detailed 

*  Question  by  the  Court  to  Mr.  Belden.  Did  not  Mr.  Field  send  you,  two  or 
three  days  ago,  an  affidavit  filled  with  gross  abuse  of  me,  and  you  declined  to 
sign  it? 

Witness  (producing  a  paper).  This  is  the  affidavit.  I  said  I  would  rather 
not  i^ign  it 

Question  by  Mr.  Field.  Did  you  show  that  affidavit  to  Judge  Barnard? 

A.  I  did  not. 

Q.  How,  then,  did  he  learn  of  its  being  sent  to  you  ? 

Judge  Barnard.  He  does  not  know,  and  never  will  in  this  world.  I  am 
now  doing  as  other  people  have  been  doing;  I  have  been  followed  by  de- 
tectives for  four  or  five  weeks  all  over  the  city,  and  now  I  am  following 
others 

Q.  Was  it  not  stated  openly  to  you,  in  a  law  office  below  Chambers 
Street,  that  you  must  prevent,  at  all  hazards,  .Judge  Barnard  from  hearing 
this  case? 

A.  In  hearing  which  case,  Judge?    I  do  not  know  which  case  you  refer  to. 

Q.  The  case  before  me 

Q.  When  you  were  prcs^ent  at  the  Metropolitan  Hotel,  did  not  one  of  the 
counsel,  who  was  there,  when  he  heard  the  complaint  read,  say  thr.t  it  was  a 
shame  to  put  Judge  Barnard  in  as  a  defendant,  and  did  not  Dudley  Field  say, 
that  by  doing  so  he  could  frighten  him  off  the  bench  and  overawe  the  bal- 
ance ? 

A.  I  do  not  remember  anything  of  it. 

Q.  See  if  one  of  the  counsel  did  not  tell  you  that  it  was  a  shame  to  put 
him  in  as  one  of  the  defendants,  and  whether  another  of  the  counsel  did  not 
tell  you  that  that  was  the  only  way  to  scare  him  off  the  bench,  and  that  you 
could  overawe  the  balance  of  the  judges? 

A    T  don't  r<>moml)Pr  anything  boiiitr  *n\i\  about  overawing  nnv  o)ip. 


A   CHAPTER   OF   ERIE.  35 

before  him  the  story  of  his  own  grievances  and  the  insults  to 
which  lie  had  been  snbjectcd,  and  tiien  again  he  vindicated 
his  purity  by  select  specimens  of  pothouse  rhetoric.'''  When 
the  Vanderbilt  comisel  moved  to  fix  a  day  on  which  their 
opponents  should  show  cause  why  a  receiver  of  the  proceeds 
of  tlie  last  over-issue  of  stock  should  not  be  appointed,  the 
judge  astonished  the  petitioners  by  outstripping  their  eager- 
ness, and  appointing  Vanderbilt's  own  son-in-law  receiver 
on  the  sjx)t.  Then  followed  a  fierce  altei'catiou  in  court,  in 
which  bench  and  bar  took  equal  part,  and  which  closed  with 
the  not  unusual  thi-eat  of  impeaching  the  presiding  judge.f 

*  "  In  tliis  wide  cify  of  a  million  or  a  million  and  a  half  of  inhabitants, 
where  a  man  can  be  hired  for  five  dollai-s  to  swear  any  man's  life  away,  there 
is  not  one  so  base  as  to  come  upon  this  stand  and  swear  that  I  had  any  tiling  to 
do  with  any  Conspiracy."' 

t  The  matter  before  the  court,  regarding  the  bail  of  the  contumacious  di- 
rectors, being  disposetl  of,  Mr.  Clark,  of  the  Vanderbilt  counsel,  rose  and 
referred  to  another  matter,  which  proved  to  be  no  less  than  an  application  for 
an  order  appointing  a  receiver  of  all  the  pmperty,  amounting  to  millions  of 
dollars,  which  had  been  issued  in  violation  of  the  injunction. 

Mr.  Field.  This  is  an  ex  parte  application  and  we  do  not  care  anytliing 
about  it.     The  worse  you  make  the  case  the  better  it  will  be  in  the  end. 

Mr.  Rrijmllo.  I  ask  your  honor  to  make  this  order  returnable  on  Monday 
morning. 

The  Court.  I  do  not  think  it  necessary  to  wait  till  Monday  moniing.  You 
had  better  have  it  returnable  forthwitli. 

Afr.  Clark.  We  ask  that  that  paper  (the  order  to  show  cause  instantly)  be 
served  upoi»  Mr.  Diveu,  who  is  now  in  court. 

The  order  w-as  then  served  on  an  individual  director  then  in  court,  and  Mr. 
Clark  moved  the  appointment  of  the  receiver. 

Judge  Barnard.  Is  there  any  objection  to  this  application? 

Mr.  P'ield  sat  smilingly  in  his  chair,  which  was  tipped  back  on  its  rear  legs, 
and  looked  composed  in  the  extreme,  but  made  no  response  to  the  inquiry  of 
the  judge. 

TJie  Cowl.  Draw  up  an  order  appointijig  George  A.  Osgood  receiver  of 
this  fund,  with  security  in  the  sum  of  S  1,000,000,  and  requiring  these  defend- 
ants to  appear  before  a  referee  in  regard  to  the  matter. 

Mr.  F/fW  (rising).  Tiie  court  will  understand  that  this  was  ex /jnrfe. 

Mr.  Chirk.  We  have  given  notice,  and  therefore  this  is  not  ex  parte. 

Mr.  Fidd.  There  has  been  no  notice  given;  there  has  been  no  sei-vice. 
This  is  ex  parte,  and  now  if  any  one  will  enter  that  order,  I  want  to  see  him 
do  it. 

Mr.  FuUerton  (excitedly  and  earnestly).  I  dare  enter  that  order,  and  will 
do  it  witli  your  honoi''s  permission. 

Mr.  Field.  May  it  please  the  court,  there  have  been  no  papers  submitted 


36  A   CHAPTER   OF   ERIE. 

When  Mr.  Jolin  B.  Haskin  was  placed  lapon  the  stand,  there 
ensued  a  scene  which  Barnard  himself  not  inaptly  character- 
ized the  next  day  as  "  outrageous  and  scandalous,  and  insult- 
ing to  the  court."  Upon  this  occasion  the  late  Mr.  James  T. 
Brady  seemed  to  be  on  the  verge  of  a  personal  collision  with 
the  witness  in  open  court ;  the  purity  of  the  presiding  magis- 
trate was  impugned,  his  venality  openly  implied  through  a 
long  cross-examination,  and  the  witness  acknowledged  that  he 
had  himself  in  the  course  of  his  career  imdertaken  for  money 
to  influence  the  mind  of  the  judge  privately  "  on  the  side 
of  right."  All  the  scandals  of  the  practice  of  the  law,  and 
the  private  immoralities  of  lawyers,  were  .dragged  into  the 
broad  light  of  day ;  the  whole  system  of  favored  counsel, 
of  private  argument,  of  referees,  and  of  unblushing  extortion, 
was  fi-eely  discussed.*     On  a  subsequent  day  the  judge  him- 

in  this  case,  and  no  affidavits  presented  on  which  this  order  is  made.  You 
have  made  it  upon  blank  paper,  and  in  complete  absence  of  any  regular  pro- 
ceeding whatever.  I  wish  to  say,  bowever,  that  just  so  sure  as  this  proceed- 
ing is  being  taken  in  this  fonn,  a  day  of  reckoning  will  as  surely  come,  when 
these  parties  will  have  to  answer  before  some  cue  for  tbis  action. 

3//'.  FuUerlon  (in  a  decidedly  animated  tone).  Let  that  day  come,  and 
there  will  be  a  reckoning  that  you  will  have  to  bear,  and  so  will  every  one  of 
those  men  who  have  been  engaged  in  this  transaction. 

•  John  B.  Haskin  was  called  as  tlie  next  witness  for  the  people,  and  exam- 
ined by  Mr.  Clark,  and  testified  that  he  was  an  attorney  at  law,  and  had  prac- 
tised about  twenty-six  yeai-s. 

Qutttlon  bij  Mr.  CUtrk.  Were  you  ever  employed  by  5Ir.  Dudley  Field, 
professionally,  i)rior  to  the  1st  of  March,  or  since? 

A.  I  was  applied  to  by  Mr.  Dudley  Field,  the  attorney  for  Mr.  Gonld,  on 
the  Otli  or  6th  of  March  last,  to  accept  a  retainer  in  this  Erie  Railroad  contro- 
versy, which  I  declined.  I  had  never  previous  to  that  time  been  employed  or 
reqnested  to  act  as  counsel  by  Mr.  Field. 

Mr.  Brady,  "on  his  own  resiK>nsibility,"  objected  to  this  line  of  examina- 
tion; but  after  some  discussion  it  was  admitted,  and  the  witness  contiiuicd:  — 

Mr.  Dudley  Field,  on  tlie  morning  of  the  5th  or  6tli  of  March,  called  at  my 
iiflicc,  and  desired  to  retain  mo  as  coimsel  in  this  Erie  controveivy.  I  asked 
him  on  wliich  side,  and  he  said, "  The  Drew  side."  I  asked  hiui  before  whom, 
and  he  said,  before  Judge  Barnard.  I  replied  that  my  intimacy  had  been  verj' 
great  with  Judge  Bamanl,  and  that  I  supposed  he  thought  my  influence  as 
associnte  in  this  case  would  assist  his  side  of  the  litigation. 

Q.  What  further  was  said? 

A.  Ho  said  that  he  desired  me  to  accept  a  retainer  in  the  case,  and  said 
that  if  I  would  do  so,  it  might  be  the  moans  of  avoiding  serious  trouble  which 
i|trould  take  place  iu  the  legislature,  as  I  was  Judge  Barnard's  friend,  and  if  I 


A   CHAPTER   OF  ERIE.  37 

self  made  inquiries  as  to  a  visit  of  two  of  the  directors  to  one 
gentleman  supposed  to  have  peculiar  influence  over  the  judi- 

woiild  get  that  injunction  modified  I  might,  as  his  friend,  prevent  tlie  terrible 
consequences  wiiich  would  result  in  this  fight  which  was  to  take  place,  as 
Judge  Barnard  would  be  impeached;  I  ihen  left  him,  and  went  into  another 
office.  In  a  short  time  Dudley  Field  came  back,  and  handed  me  this  book 
[producing  a  book],  with  his  written  modification  of  the  injunction,  as  I  be- 
lieve, in  his  own  handwriting,  saying,  "If  you  will  get  that  signed  by  Judge 
Barnard,  I  will  give  you  five  thousand  dollars;  if  that  sum  is  not  sufficient,  I 
will  make  it  more."  I  declined  the  ofler;  and  having  occasion  to  go  to  the 
City  Hall  to  see  Judge  Barnard,  I  went,  and  met  him  at  the  Astor  House, 
where  lie  had  gone  with  some  friends, — John  R.  Hackett,  Mr.  Thomson,  one 
of  the  directors  of  the  Erie  Railroad  Company,  and  some  others  whom  I  do 
not  recollect.  I  told  him  incidentally  of  this  application  to  me,  and  he  said: 
"  Dudley  Field  must  be  a  dirty  fellow  to  apply  to  you  for  this  modification  in 
this  way,  for  he  applied  to  me  in  court  this  morning  for  this  same  modifica- 
tion, and  I  refused  to  grant  it." 

Q.  Did  j'ou  see  Dudley  Field  again? 

A.  I  did  not  see  him  again. 

Q.  Did  you  accept  the  retainer? 

A.  I  did  not  accept  the  retainer  or  undertake  the  service. 

Cross-examination  by  Mr.  James  T.  Brady. 

Q.  Well,  Mr.  Haskin,  have  j'ou  ever  in  your  life  been  applied  to  by  any- 
body,  to  use  your  influence,  personally  or  professionally,  with  Judge  Barnard, 
to  accomplish  any  result  whatever? 

A.  Yes,  sir;  I  think  I  have. 

Q.  Personally? 

A.  Yes. 

Q.  Professionally? 

A.  Yes. 

Q.  To  influence  his  action  as  a  judge? 

A.  Well,  no;  not  that. 

Q.  What,  then? 

A.  Well,  in  cases  where  there  were  great  interests  at  stake,  to  point  out 
to  him  certain  objects  tliat  were  entitled  to  consideration. 

Q.  Did  you  ever  agree  or  undertake  to  influence  his  action  as  a  judge. 

A.  I  might  have  done  so  on  tlie  side  of  right.  What  do  you  mean, 
sir  ? 

Mr .  Bradjj.  0  well,  you  will  understand  what  I  mean,  sir.  Have  you 
never  in  all  your  life  used  your  influence  with  Judge  Barnard  to  induce  him 
to  make  a  decision  in  favor  of  some  person  in  litigation  whose  cause  you 
espoused  ? 

A.  I  don't  recollect  any  case  of  that  kind. 

Q.  Will  you  swear  that  you  have  never  done  so? 

A.  1  won't  swear  I  did  n't,  because  I  might  have  done  it  in  some  case  in 
the  number  of  years  I  have  been  acquainted  with  him. 

Q.  Did  you  ever  receive  any  kind  of  reward,  directly  or  indirectly,  for 


38  A   CHAPTER   OF   ERIE. 

cial  mind,  and  evinced  great  familiarity  with  the  negotiations 
then  cai-ried  on,  and  even  showed  some  disposition  to  extend 

using  any  species  of  influence,  or  promisinn;  to  use  any  species  of  influence, 
with  Judge  Barnard,  or  control  or  direct  his  action  in  any  respect  wliat- 
ever? 

A.  I  have  never  received  anything;  no,  sir,  except  my  legitimate  fees, 
which  1  liave  received  in  references  and  so  forth. 

He  then  asked  him  about  his  connection  with  the  Christy  will  case. 

Witness  said  he  was  general  counsel  in  that. 

Q.  How  did  you  earn  your  fee? 

Wibiess.  I  will  not  answer;  it  is  none  of  your  business;  it  is  impertinent. 

Mr.  Clark  interposed,  and  said  it  was  irrelevant. 

Mr.  Brady.  I  want  to  show  that  Mr.  Haskin  received  a  fee  for  his  in- 
fluence with  the  judge  to  gain  a  decision  at  the  General  Term. 

Mr.  Haskin  said  tliere  was  a  suit  pending  about  the  matter. 

Mr.  Brady  repeated  that  when  he  went  into  the  case  he  knew  the  hostility 
with  which  he  would  be  met.  He  was  prepared  for  it.  He  had  known  some 
of  the  men  a  great  many  years,  and  he  had  hitherto  kept  still.  He  would 
repeat  the  question  about  the  Christy  will  case. 

Witness.  I  refuse  to  answer;  it  is  none  of  your  business. 

Witness  further  on  gave  some  testimony  as  to  what  he  said  to  Judge  Bar- 
nard about  the  Merchants'  Express  Company  case  before  that  judge  last  sum- 
mer; he  (witness)  was  not  a  counsel  in  it,  but  when  on  a  fishing  excursion 
last  summer  he  was  talking  with  the  court  about  the  law  of  the  case.  Ho 
told  the  judge  there  were  some  cases  in  which  a  judge  could  not  alford  to  do 
n  fiivor  for  a  friend;  I  knew  you  were  in  the  case,  Mr.  Brady;  I  told  Judge 
Barnard  that  the  newspapers  wQre  all  down  on  the  express  monopoly. 

Mr.  Brady.  Did  you  tell  Judge  Barnard  in  what  cases  a  judge  could 
afford  to  do  a  favor  for  a  friend !  You  say  yon  told  hira  there  were  some  in 
which  a  judge  could  not  do  a  favor. 

A.  I  did  not  say  there  were  any. 

The  next  day  it  wa«  supposed  that  Jfr.  Field  would  he  examined  and  the 
court-room  was  crowded.  .Tudge  Barnard,  however,  declined  to  proceed  any 
furtlier,  and  ordered  the  evidence  of  tlie  previous  day  to  be  stricken  frnni  the 
record.  He  further  stated  that  he  had  already  been  busily  engaged  during  the 
day  in  the  other  court-room,  and  did  not  intend  to  sit  here  to  gratify  iniDcr- 

tinent  curiosity In  regard  to  the  examination  of  Jlr.  Field,  he  (Jlr. 

Field)  could  make  his  affidavit  ex  parte,  and  would  have  the  same  publicity 
given  to  his  testimony  as  hail  been  given  to  that  taken  yesterday. 

Mr.  Brady  said  he  appeared  this  afternoon  exclusively  to  attend  to  the 
examination  of  Mr.  Fiel '..  Of  course  he  luid  had  no  notice  on  his  side  of  the 
ease  that  there  had  been  any  conference  between  his  honor  and  other  eminent 
gentlonion  as  to  what  course  should  be  taken.  He  had  come  to  take  charge 
of  Mr.  Field's  case,  and  as  regards  whatever  had  happened,  he  took  the  whole 
responsibility  of  it.  It  belonged  to  him  exclusively,  —  every  question,  every 
suggestion,  —  as  if  would  also  lielong  to  him  IiereafYer.     He  simjily  asked  now 


A   CHAPTER   OF   ERIE.  39 

the  inquiry  indefinitely  into  periodical  literature.*  Nor  were 
the  lawyers  in  any  way  behind  the  judge.  At  one  moment 
they  would  indulge  in  personal  wrangling,  and  accuse  each 
other  of  the  grossest  malpractice,  and  the  next,  fixvor  each 
other  with  remarks  upon  manners,  more  pointed  than  delicate. 
All  this  time  injunctions  were  flying  about  like  hail-stones; 
but  the  crowning  injunction  of  all  was  issued,  in  reference  to 
the  appointment  of  a  receiver,  by  Judge  Gierke,  a  colleague 
of  Judge  Barnard,  at  the  time  sitting  as  a  member  of  the 
Court  of  Appeals  at  Albany.  The  Gilbert  injunction  had 
gone,  it  might  have  seemed,  sufficiently  far,  in  enjoining 
Barnard  the  individual,  while  distinctly  disavowing  all  refer- 
ence to  him  in  his  judicial  functions.  Judge  Gierke  made  no 
such  exception.     He  enjoined  the  individual  and  he  enjoined 

that  Mr.  Field  have  the  opportunity  to  be  heard  in  the  matter  publicly,  as  the 
other  witnesses  had  been. 

Mr.  Clark,  in  reply,  said  that  he  would  give  Mr.  Brad\'  a  promise  that,  if  he 
lived,  he  (Mr.  Brady)  should  have  the  opportunity  of  examining  Mr.  Field  be- 
fore a  referee,  if  they  could  agree  upon  a  gentleman  who  should  be  acceptable. 

Judge  Barnard,  in  reply  to  Mr.  Field,  who  asked  for  the  appointment  of  a 
referee,  said  that  he  had  made  the  only  order  in  the  case  he  would  make  to- 
day, and  that  the  matter  would  now  stand  adjourned  until  Thursday  next,  at 
three  o'clock,  P.  M. 

No  affidavit  of  Mr.  Field  was  ever  taken,  and  the  subject  was  allowed  to 
drop. 

*  Question  by  the  Judge  to  Mr.  Bdden  Do  you  know  whether  James  Fisk, 
Jr.,  and  William  H.  Marston,  went  in  a  carriage  to  John  J.  Crane's  house  and 
offered  him  $50,000  to  vacate  this  injunction;  and  did  you  hear  from  a  direc- 
tor of  the  Erie  Railroad  that  the  Executive  Conmiittee  had  allowed  that  sum 
to  be  paid? 

Answer.  No  one  of  the  directors  told  me  this;  but  I  think  I  heard  some- 
thing of  the  kind.  I  can't  tell  from  whom  I  heard  it;  there  were  numerous 
reports  flying  about  at  the  time. 

Judge  Barnard.  I  have  n't  [addressing  counsel]  ruled  the  question  out 
simply  because  I  want  to  know  whether  I  am  fit  to  sit  on  the  bench  or  not;  if 
I  have  been  engaged  in  a  conspiracy,  I  am  unfit  to  sit  here. 

Mr.  Field  said  the  question  would  open  new  evidence  that  had  already  been 
ruled  out 

Judge  Barnard.  It  was  iiiled  out  because  I  intend  to  have  this  "  North 
American  Review  "  [holding  up  the  book]  put  in  evidence,  which  contains  an 
article  about  me,  written  by  a  clerk  in  your  office.  I  intend  to  have  this 
whole  matter  ferreted  out. 


40  A  CHAPTER   OF   ERIE. 

tlie  judge;  he  forbade  his  making  any  order  appointing  a 
receiver,  and  he  forbade  the  clerks  of  his  court  from  entering 
it  if  it  were  made,  and  the  receiver  from  accepting  it  if  it 
were  entered.  The  signing  of  this  extraordinary  order  by  any 
judge  in  his  senses  admits  of  no  explanation.  The  Erie  coun- 
sel served  it  upon  Judge  Barnard  as  he  sat  upon  the  bench, 
and,  having  done  so,  withdrew  from  the  court-room ;  where- 
upon the  judge  immediately  proceeded  to  vacate  the  order, 
and  to  appoint  a  receiver.  This  appointment  was  then  en- 
tered by  a  clerk,  who  had  also  been  enjoined,  and  the  receiver 
was  himself  enjoined  as  soon  as  he  could  be  caught.  Finally 
the  maze  had  become  so  intricate,  and  the  whole  litigation  so 
evidently  endless  and  aimless,  that  by  a  sort  of  agreement 
of  parties.  Judge  lugraham,  another  colleague  of  Judge 
Barnard,  issued  a  final  injunction  of  universal  application, 
as  it  were,  and  to  be  held  inviolable  by  common  consent, 
mider  which  proceedings  were  stayed,  pending  an  appeal.  It 
was  high  time.  Judges  were  becoming  very  shy  of  anything 
connected  with  the  name  of  Erie,  and  Judge  McCunn  had,  in 
a  lofty  tone,  informed  counsel  that  he  preferred  to  subject 
himself  to  the  liability  of  a  fine  of  a  thousand  dollars  rather 
than,  by  issuing  a  writ  of  habeas  corjnis,  allow  his  court  "to 
have  anything  to  do  with  the  scandal." 

The  result  of  this  extraordinaiy  litigation  may  be  sixmmed 
up  in  a  few  words.  It  had  two  branches  :  one,  the  appoint- 
ment of  a  receiver  of  the  proceeds  of  the  hundred  thousand 
shares  of  stock  issued  in  violation  of  an  injunction ;  the 
other,  the  processes  against  the  persons  of  the  directors  for  a 
contempt  of  court.  As  for  the  receiver,  every  dollar  of  the 
money  this  officer  was  intended  to  receive  was  well  known 
to  be  in  New  Jersey,  beyond  his  reach.  Why  one  party 
cared  to  insist  on  the  appointment,  or  why  the  other  party 
objected  to  it,  is  not  very  apparent.  Mr.  Osgood,  the  son-in- 
law  of  Vandcrbilt,  was  appointed,  and  immediately  enjoined 
from  acting ;  Rub8C(]ucntly  he  resigned,  when  Mr.  Peter  B. 
Sweeney,  the  head  of  the  Tammany  ring,  was  appointed  in 
his  place,  without  notice  to  the  other  side.     Of  course  he  had 


A   CHAPTER   OF   ERIE.  41 

nothing  to  do,  as  there  was  nothing  to  be  done,  and  so  he  was 
subsequently  allowed  by  Judge  Barnard  $  150,000  for  his  ser- 
vices. The  contempt  cases  had  even  less  result  than  that 
of  the  receivership.  The  settlement  subsequently  eifected 
between  the  litigants  seemed  also  to  include  the  courts.  The 
outraged  majesty  of  the  law,  as  represented  in  the  person 
of  Mr.  Justice  Barnard,  was  pacified,  and  everything  was  ex- 
plained as  having  been  said  and  done  in  a  "  Pickwickian 
sense  " ;  so  that,  when  the  terms  of  peace  had  been  aiTanged 
between  the  high  contending  parties,  Barnard's  roaring  by 
degrees  subsided,  until  he  roared  as  gently  as  any  sucking 
dove,  and  finally  he  ceased  to  roar  at  all.  The  penalty  for 
violating  an  injimction  in  the  manner  described  was  fixed  at 
the  not  unreasonable  sum  of  ten  dollars,  except  in  the  cases 
of  Mr.  Drew  and  certain  of  his  more  prominent  associates; 
their  contumacy  his  Honor  held  too  gross  to  be  estimated  in 
money,  and  so  they  escaped  without  any  punishment  at  all. 
Probably  being  as  well  read  a  lawyer  as  he  was  a  dignified 
magistrate,  Judge  Barnard  bore  in  mind,  in  imposing  these 
penalties,  that  clause  of  the  fundamental  law  which  provides 
that  "  no  excessive  fines  shall  be  imposed,  or  cruel  or  unusual, 
punishments  inflicted."  The  legal  profession  alone  had  cause 
to  regret  the  cessation  of  this  litigation  ;  and,  as  the  Erie 
counsel  had  $150,000  divided  among  them  in  fees,  it  may 
be  presumed  that  even  they  were  finally  comforted.  And 
all  this  took  place  in  the  court  of  that  State  over  which  the 
immortal  Chancellor  Kent  had  once  presided.  His  great 
authority  was  still  cited  there,  the  halo  which  surrounds  his 
name  still  shed  a  glory  over  the  bench  on  which  he  had  sat, 
and  yet  these,  his  immediate  successors,  could 

"  On  tliat  Iiigh  mountain  cease  to  feed, 
And  batten  on  this  moor." 


42  A  CHAPTER   OF   ERIE. 


II. 

It  is  now  necessary  to  return  to  the  real  field  of  operations, 
which  had  ceased  on  the  morning  of  the  11th  of  March  to  be 
in  the  courts  of  law.  As  the  arena  widened  the  proceedings 
became  more  complicated  and  more  difficult  to  trace,  em- 
bracing as  they  did  the  legislatures  of  two  States,  neither 
of  them  famed  for  purity.  In  the  first  shock  of  the  catastro- 
phe it  was  actually  believed  that  Commodore  Vanderbilt  con- 
templated a  resort  to  open  violence  and  acts  of  private  war. 
There  were  intimations  that  a  scheme  had  been  matured  for 
kidnapping  certain  of  the  Erie  directors,  including  Mr.  Drew, 
and  bringing  them  by  force  within  reach  of  Judge  Barnard's 
process.  It  appeared  that  on  the  16th  of  March  some  fifty 
individuals,  subsequently  described,  in  an  affidavit  filed  for  the 
special  benefit  of  Mr,  Justice  Barnard,  as  "disorderly  charac- 
ters, commonly  known  as  roughs,"  crossed  by  the  Pavonia 
Ferry  and  took  possession  of  the  Erie  depot.  From  their 
conversation  and  inquiries  it  wa.s  divined  that  they  came 
intending  to  "  copp  "  Mr.  Drew,  or,  in  plainer  phraseology,  to 
take  him  by  force  to  New  York ;  and  that  they  expected  to 
receive  the  sum  of  $  50,000  as  a  reward  for  so  doing.  The 
exiles  at  once  loudly  charged  Vanderbilt  himself  with  originat- 
ing this  blundering  scheme.  They  simulated  intense  alarm. 
From  day  to  day  new  panics  were  started,  until,  on  the  19th, 
Drew  was  secreted,  a  standing  army  was  organized  from  the 
employees  of  the  road,  and  a  small  navy  equipped.  The 
alarm  spread  through  Jersey  City ;  the  militia  was  held  in 
readiness  ;  in  the  evening  the  stores  were  closed  and  the  citi- 
zens began  to  arm  ;  while  a  garrison  of  about  one  hundred  and 
twenty-five  men  intrenched  themselves  around  the  directors, 
in  their  hotel.  On  the  2l8t  there  was  another  alarm,  and 
the  fears  of  an  attack  continued,  with  lengthening  intervals 
of  quiet,  until  the  31  st,  when  the  guard  was  at  last  with- 
drawn. It  is  impossible  to  siippose  that  Vanderbilt  ever  had 
any  knowledge  of  this  ridiculous  episode  or  of  its  cause,  ex- 


A   CHAPTER   OF   ERIE.  43 

cept  through  the  press.  A  band  of  ruffians  may  have  crossed 
tlie  ferry,  intending  to  kidnap  Drew  on  speculation ;  but  to 
suppose  that  the  shrewd  and  energetic  Commodore  ever  sent 
them  to  go  gaping  about  a  station,  ignorant  both  of  the  per- 
son and  the  whereabouts  of  him  they  sought  would  be  to  im- 
pute to  Vanderbilt  at  once  a  crime  and  a  blunder.  Such 
botching  bears  no  trace  of  his  clean  handiwork. 

The  first  serious  effort  of  the  Erie  party  was  to  intrench 
itself  in  New  Jersey  ;  and  here  it  met  with  no  opposition.  A 
bill  making  the  Erie  Railway  Company  a  corporation  of  New 
Jersey,  with  the  same  powers  they  enjoyed  in  New  York,  was 
hurried  through  the  legislature  in  the  space  of  two  hours, 
and,  after  a  little  delay,  signed  by  the  Governor.  The  aston- 
ished citizens  of  the  latter  State  saw  their  famous  broad- 
gauge  road  thus  metamorphosed  before  their  eyes  into  a  den- 
izen of  the  kingdom  of  Camden  and  Amboy.  Here  was 
another  dreadful  hint  to  Wall  Street.  What  farther  issues 
of  stock  might  become  legal  under  this  charter,  how  the  ten- 
ure of  the  present  Board  of  Directors  might  be  altered,  what 
curious  legal  complications  might  arise,  were  questions  more 
easily  put  than  satisfactorily  answered.  The  region  of  possi- 
bilities was  considerably  extended.  The  new  act  of  incor- 
poration, however,  was  but  a  precaution  to  secure  for  the 
directors  of  the  Erie  a  retreat  in  case  of  need ;  the  real  field 
of  conflict  lay  in  the  legislature  of  New  York,  and  here  Van- 
derbilt was  first  on  the  ground. 

The  corruption  ingrained  in  the  political  system  of  New 
York  City  is  supposed  to  have  been  steadily  creeping  into  the 
legislature  at  Albany  during  several  years  past.  The  press 
has  rung  with  charges  of  venality  against  members  of  this 
body  ;  individuals  have  been  pointed  out  as  the  recipients 
of  large  sums  ;  men  have  certainly  become  rich  during  short 
terms  in  office  ;  and,  of  all  the  rings  which  influence  New 
York  legislation,  the  railroad  ring  is  currently  supposed  to  be 
the  most  corrupt  and  corrupting.  The  mind  of  the  unpreju- 
diced inquirer,  who  honestly  desires  to  ascertain  the  truth  on 
this  subject,  will  probably  pass  through  several  phases  of  be- 


44  A   CHAPTER  0^  ERIE. 

lief  before  settling  into  conviction.  In  the  first  place,  he  will 
be  overwhelmed  by  the  broad,  sweeping  charges  advanced  in 
the  columns  of  the  press  by  responsible  editors  and  well- 
informed  correspondents.  He  will  read  with  astonishment 
that  legislation  is  controlled  by  cliques  and  is  openly  bought 
and  sold  ;  that  the  lobby  is  but  the  legislative  broker's  board, 
where  votes  are  daily  quoted ;  that  sheep  and  bullocks  are  not 
more  regularly  in  the  market  at  Smithfield  than  Assembly- 
men and  Senators  at  Albany.  Amazed  by  such  statements, 
the  inquirer  becomes  incredulous,  and  demands  evidence  in 
support  of  them.  This  is  never  forthcoming.  Committees 
of  investigation  —  one  or  two  in  a  session  —  are  regularly 
appointed,  and  their  reports  are  invariably  calculated  to  con- 
found the  existing  confusion.  These  committees  generally 
express  a  belief  in  the  existence  of  corruption  and  an  utter 
inability  to  find  it  out ;  against  some  notoriously  venal  brother 
legislator  they  enter  a  Scotch  verdict  of  "  not  proven  " ;  and, 
having  thus  far  been  very  guarded  in  their  language,  they 
then  launch  forth  into  tremendous  denunciations  of  an  un- 
bridled and  irresponsible  press.  Here  they  have  it  all  their 
own  way,  and,  indeed,  too  often  make  out  an  excellent  case. 
Meanwhile  the  seeker  after  truth  leaves  both  correspondents 
and  committees,  and  tries  to  reach  a  conclusion  by  other 
means.  Public  rumor  he  finds  to  be  merely  a  reflection  of  the 
press,  or  itself  the  impalpable  form  which  the  press  reflects. 
No  conviction  can  be  had  on  such  evidence.  He  finds  loose 
statements,  unproved  assertions,  and  unsustained  charges, 
tending  to  pioduce  general  incredulity.  Where  so  much  more 
is  alleged  than  is  proved,  nothing  is  finally  believed  ;  until 
individual  corruption  may  be  almost  measured  by  an  ostenta- 
tious disregfird  of  public  opinion.  Passing  through  the  phase 
of  incredulity,  the  inquirer  may  at  last  resort  to  the  private 
judgment  of  the  best  informed.  Appealing  to  individuals  in 
whose  purity,  judicial  temper,  and  means  of  information  he 
has  entire  confidence,  he  will  i)rol>ably  find  liis  conclusions  as 
discouraging  as  they  are  inevitable.  The  weight  of  opinion 
and  of  evidence  gradually  becomes  irresistible,  until  his  mind 


A   CHAPTER   OF    ERIE.  45 

settles  down  into  a  sad  belief  that  probably  no  representative 
bodies  were  ever  more  thorougidy  venal,  more  shamelessly 
corrupt,  or  more  hopelessly  beyond  the  reach  of  public  opin- 
ion, than  are  certain  of  those  bodies  which  legislate  for  repub- 
lican America  in  this  latter  half  of  tlie  nineteenth  century. 
Certainly,  none  of  the  developments  which  marked  the  Erie 
conflict  in  the  New  York  legislature  of  1868  would  tend  to 
throw  doubts  on  this  conclusion  when  once  arrived  at. 

One  favorite  method  of  procedure  at  Albany  is  through  the 
appointment  of  committees  to  investigate  the  affairs  of  wealthy 
corporations.  The  stock  of  some  great  company  is  manipu- 
lated till  it  fluctuates  violently,  as  was  the  case  with  Pacific 
Mail  in  1867.  Forthwith  some  member  of  the  Assembly  rises 
and  calls  for  a  committee  of  investigation.  The  instant  the 
g-ame  is  afoot,  a  rush  is  made  for  positions  on  the  commit- 
tee. Tiie  proposer,  of  course,  is  a  member,  probably  chair- 
man. The  advantages  of  the  position  are  obvious.  The  com- 
mittee constitutes  a  little  temporary  outside  ring.  If  a  mem- 
ber is  corrupt,  he  has  substantial  advantages  offered  him  to 
influence  his  action  in  regard  to  the  report.  If  he  is  not  open 
to  bribery,  he  is  nevertheless  in  possession  of  very  valuable 
information,  and  an  innocent  little  remark,  casually  let  fall, 
may  lead  a  son,  a  brother,  or  a  loving  cousin  to  make  vciy 
judicious  purchases  of  stock.  Altogether,  the  position  is  one 
not  to  be  avoided. 

The  investigation  phase  was  the  first  which  the  Erie  struggle 
assumed  at  Albany.  During  the  early  stages  of  the  conflict 
the  legislature  had  scented  the  carnage  from  afar.  There  was 
"  money  in  it,"  and  the  struggle  was  watched  with  breathless 
interest.  As^arly  as  the  5th  of  Maj'ch  the  subject  had  been 
inti'oduced  into  the  State  Senate,  and  an  investigation  mto 
the  circumstances  of  the  company  was  called  for.  A  commit- 
tee of  three  was  ordered,  but  the  next  day  a  senator,  by  name 
Mattoon,  moved  to  inci'ease  the  number  to  five,  which  was 
done,  he  himself  being  naturally  one  of  the  additional  inem- 
bers.  This  committee  had  its  first  sitting  on  the  10th,  at  the 
very  crisis  of  the  great  explosion.     But  before  the  investiga- 


46  A   CHAPTER    OF   ERIE. 

tion  was  entered  upon,  Mr.  Mattoou  thought  it  expedient  to 
convince  the  contending  parties  of  his  own  perfect  impartial- 
ity and  firm  determination  to  hold  in  check  the  corrupt  im- 
pulses of  his  associates.  With  this  end  in  view,  upon  the  9th 
or  the  10th  he  hurried  down  to  New  York,  and  visited  West 
Street,  Avhere  he  had  an  interview  with  the  leading  Erie  direc- 
tors. He  explained  to  them  the  coiTupt  motives  which  had 
led  to  the  appointment  of  the  committee,  and  how  his  sole 
object  in  obtaining  an  increase  of  the  number  had  been 
to  put  himself  in  a  position  in  which  he  might  be  able 
to  prevent  these  evil  practices  and  see  fair  play.  Curiously 
enough,  at  the  same  interview  he  mentioned  that  his  son  was 
to  be  appointed  an  assistant  sergeant-at-arms  to  aid  in  the  in- 
vestigation, and  proved  his  disinterestedness  by  mentioning 
the  fact  that  this  son  was  to  serve  without  pay.  The  labors 
of  the  committee  continued  until  the  31st  of  March,  and  dur- 
ing that  time  Mr.  Mattoon,  and  at  least  one  other  senator, 
pui-sued  a  course  of  private  inquiry  which  involved  further 
visits  to  Jersey  City.  Naturally  enough,  Mr.  Drew  and  his 
associates  took  it  into  their  heads  that  the  man  wanted  to  be 
bought,  and  even  affirmed  subsequently  that,  at  one  inter- 
view, he  had  in  pretty  broad  terms  offered  himself  for  sale. 
It  has  not  been  distinctly  stated  in  evidence  by  any  one  that 
an  attempt  was  made  on  his  purity  or  on  that  of  his  public- 
spirited  son ;  and  it  is  difficult  to  believe  that  one  who  came 
to  New  York  so  full  of  high  purpose  could  have  been  suffi- 
ciently corrupted  by  metropolitan  influences  to  receive  bribes 
from  both  sides.  Whether  he  did  so  or  not  his  proceedings 
were  terribly  suggestive  as  regards  legislative  morality  at 
Albany.  Here  wixs  a  senator,  a  member  of  a  co*niittee  of  in- 
vestigation, rousing  gamblers  from  their  beds  at  early  hours 
of  the  morning  to  hold  interviews  in  the  faro-bank  parlor  of 
the  establishment,  and  to  give  "points"  on  which  to  operate 
upon  the  Joint  account.  Even  tlieu  the  wretched  creature 
could  not  even  keep  faith  with  his  very  "pals"  ;  he  wrote  to 
them  to  "  go  it  heavy  "  for  Drew,  and  then  himself  went  over  to 
Vnnderbilt,  —  he  made  agreements  to  share  profits  and  then 


A   CHAPTER   OF  ERIE.  47 

submitted  to  exposure  sooner  than  meet  his  part  of  the  loss. 
A  man  more  thoroughly,  shamefacedly  contemptible  and 
coiTupt,  —  a  more  perfect  specimen  of  a  legislator  on  sale 
haggling  for  his  own  price,  could  not  well  exist.  In  this  case 
he  cheated  every  one,  including  himself  Accident  threw 
great  opportunities  in  his  way.  On  the  31st  the  draft  of  a 
proposed  report,  exonerating  in  great  measure  the  Drew  fac- 
tion, was  read  to  him  by  an  associate,  to  which  he  not  only 
made  no  objection,  but  was  even  understood  to  assent.  On 
the  same  day  another  report  was  read  in  his  presence,  strongly 
denouncing  the  Drew  faction,  sustaining  to  the  fullest  extent 
the  charges  made  against  it,  and  characterizing  its  conduct  as 
corrupt  and  disgraceful.  Each  report  was  signed  by  two  of  his 
associates,  and  Mr.  Mattoon  found  himself  in  the  position  of 
holding  the  balance  of  power ;  whichever  report  he  signed 
would  be  the  report  of  the  committee.  He  expressed  a  desire 
to  think  the  matter  over.  It  is  natxiral  to  suppose  that,  in  his 
eagerness  to  gain  information  privately,  Mr.  Mattoon  had  not 
confined  his  unofficial  visits  to  the  Drew  camp.  In  any  case 
his  mind  was  in  a  state  of  painful  suspense.  Finally,  after 
arranging  in  consultation  on  Tuesday  for  a  report  favoring  the 
Drew  party,  on  Wednesday  he  signed  a  report  strongly  de- 
nouncing it,  and  by  doing  so  settled  the  action  of  the  commit- 
tee. Mr.  Jay  Gould  must  have  been  acquainted  with  the  cir- 
cumstances of  the  case,  and  evidently  supposed  that  Mr. 
Mattoon  was  "  fixed,"  since  he  subsequently  declared  he  was 
*'  astounded  "  when  he  heard  that  Mr.  Mattoon  had  signed  this 
report.  The  committee,  however,  with  their  patriotic  ser- 
geant-at-arms,  whose  services,  by  the  way,  cost  the  State  but 
a  hundred  dollars,  desisted  at  length  from  their  labors,  the 
result  of  which  was  one  more  point  gained  by  Commodore 
Vanderbilt. 

Indeed,  Vanderbilt  had  thus  far  as  much  outgeneralled 
Drew  in  the  mainifacture  of  public  opinion  as  Drew  had  out- 
generalled Vanderbilt  in  the  manufixcture  of  Erie  stock.  His 
whole  scheme  was  one  of  monopoly,  which  was  opposed  to 
every  interest  of  tlie  city  and  State  of  New  York,  yet  into  the 


48  A   CHAPTER   OF  ERIE. 

support  of  this  scheme  he  had  brought  all  the  leading  papers 
of  New  York  City,  with  a  single  exception.  Now  again  lie 
seemed  to  have  it  all  his  own  way  in  the  legislature,  and  the 
tide  ran  strongly  against  the  exiles  of  Erie.  Tlie  report  of  the 
investigation  committee  was  signed  on  April  1st,  and  may  be 
considered  as  marking  the  high-water  point  of  Vanderbilt's 
success.  Hitherto  the  Albany  interests  of  the  exiles  had  been 
confided  to  mere  agents,  and  had  not  prospered ;  but,  when 
fairly  roused  by  a  sense  of  danger,  the  Drew  pai'ty  showed  at 
least  as  close  a  fiimiliarity  with  the  tactics  of  Albany  as  with 
those  of  Wall  Street.  The  moment  they  felt  themselves  set- 
tled at  Jersey  City  they  had  gone  to  work  to  excite  a  popular 
sympathy  in  their  own  behalf.  The  cry  of  monopoly  was  a 
sure  card  in  their  hands.  They  cared  no  more  for  the  actual 
welfare  of  commerce,  involved  in  railroad  competition,  than 
they  did  for  the  real  interests  of  the  Erie  Railway ;  but  they 
judged  truly  that  there  was  no  limit  to  the  extent  to  which 
the  public  might  be  imposed  upon.  An  active  competition 
with  the  Vanderbilt  roads,  by  land  and  water,  was  inaugurated ; 
fares  and  freights  on  the  Erie  were  reduced  on  an  average  by 
one  third ;  sounding  proclamations  were  issued  ;  "  interview- 
ers "  from  the  press  returned  rejoicing  from  Tayloi''s  Hotel  to 
New  York  City,  and  the  Jersey  shore  quaked  under  the  clat- 
ter of  this  Chinese  battle.  The  influence  of  these  tactics 
made  itself  felt  at  once.  By  the  middle  of  March  memorials 
against  monopoly  began  to  flow  in  at  Albany. 

While  popular  sympathy  was  thus  roused  by  the  bribe  of  ac- 
tive competition,  a  bill  was  introduced  into  the  Assembly,  in 
the  Erie  interest,  legalizing  the  recent  issue  of  new  stock, 
declaring  and  regulating  the  power  of  issuing  convertible 
bonds,  providing  for  a  broad-gauge  connection  with  Chicago 
and  the  guaranty  of  the  bonds  of  the  Boston,  Hartford,  & 
Erie,  and  finally  forbidding,  in  so  far  as  any  legislation  could 
forbid,  the  consolidation  of  the  Central  and  the  Erie  in  the 
hands  of  Vanderbilt.  This  bill  was  referred  to  the  Committee 
on  Railroads  on  the  13th  of  March.  On  the  20th  a  public 
hearing  was    begun,   and  the  committee  proceeded   to  take 


A   CHAPTER   OF   ERIE.  49 

evidence,  aided  hj  a  long  array  of  opposing  counsel,  most 
of  whom  had  figured  in  the  proceedings  in  the  courts  of  law. 
In  a  few^  days  the  bill  was  adversely  reported  upon,  and  the 
report  adopted  in  the  Assembly  by  the  decisive  vote  of  eighty- 
three  to  thirty-two.  This  was  upon  the  2 7th. of  March.  The 
hint  was  a  broad  one  ;  the  exiles  must  give  closer  attention  to 
their  interests.  So  soon  as  the  news  of  this  adverse  action 
reached  Jersey  City,  it  was  decided  that  Mr.  Jay  Gould  shoiild 
brave  the  terrors  of  the  law,  and  personally  superintend  mat- 
ters at  Albany.  Neither  Mr.  Drew  nor  his  associates  desired 
to  become  permanent  residents  of  Jersey  City ;  nor  did  they 
wish  to  return  to  New  York  as  criminals  on  their  way  to  jail. 
Mr.  Gould  was  to  pave  the  way  to  a  different  return  by  caus- 
ing the  recent  issue  of  convertible  bonds  to  be  legalized.  That 
onco  done,  Commodore  Vanderbilt  was  not  the  man  to  wage 
an  unavailing  war,  and  a  compromise,  in  which  Barnard  and 
his  processes  of  contempt  would  be  thrown  in  as  a  make- 
weight, coidd  easily  be  effected.  A  rumor  was  therefore 
started  that  Mr.  Gould  was  to  leave  for  Ohio,  supplied  with 
the  necessary  authority  and  funds  to  press  vigorously  to  com- 
pletion the  eighty  miles  of  broad-gauge  track  between  Akron 
and  Toledo,  which  would  open  to  the  Erie  the  much-coveted 
connection  with  Chicago.  Having  hung  out  this  false  light, 
Mr.  Jay  Gould  went  on  his  mission,  the  president  of  the  com- 
pany having  some  time  previously  drawn  half  a  million  of  dol- 
lars out  of  the  overflowing  Erie  treasury. 

This  mission  was  by  no  means  imattended  by  difficulties. 
In  the  first  place,  Judge  Barnard's  processes  for  contempt 
seemed  to  threaten  the  liberty  of  Mr.  Gould's  person.  He  left 
Jersey  City  and  arrived  at  Albany  on  the  30th  day  of  March, 
three  days  after  the  defeat  of  the  Erie  bill,  and  two  days 
befoi-e  Mr.  Mattoon  had  made  up  his  mind  as  to  which  report 
he  would  sign.  Naturally  his  opponents  were  well  satisfied 
with  the  present  aspect  of  affairs,  and  saw  no  benefit  likely  to 
arise  from  Mr.  Gould's  presence  in  Albany.  The  day  after  his 
aiTival,  therefore,  he  was  arrested,  on  the  writ  issued  against 
him  for  contempt  of  court,  and  held  to  bail  in  half  a  million 

3  D 


50  A  CHAPTER   OF  ERIE. 

of  dollars  for  his  appearance  in  New  York  on  the  following 
Saturday.  He  was  immediately  bailed  of  course,  and  for  the 
next  few  days  devoted  himself  assiduously  to  the  business  he 
had  in  hand.  On  Saturday  he  appeared  before  Judge  Barnard, 
and  was  duly  put  in  charge  of  the  sheriff  to  answer  certain 
interrogatories.  It  would  seem  to  have  been  perfectly  easy 
for  him  to  give  the  necessary  bail,  and  to  return  from  Barnard's 
presence  at  once  to  Albany;  but  the  simple  method  seems 
never  to  have  been  resorted  to  throughout  these  complications  : 
nothing  was  ever  done  without  the  interposition  of  a  writ  and 
the  assistance  of  a  crowd  of  counsel.  In  this  case  Judge 
Ban-ett  of  the  Common  Pleas  was  appealed  to,  who  issued  a 
writ  of  luxheas  cor/nis,  by  virtue  of  which  Mr.  (iould  was  taken 
out  of  the  hands  of  the  sheriff  and  again  brought  into  court. 
Of  course  the  hearing  of  the  case  was  deferred,  and  it  was 
equally  a  matter  of  course  that  Mr.  Gould  was  bent  on  return- 
ing at  once  to  his  field  of  labor.  The  officer  to  whose  care 
Mr.  Gould  was  intrusted  was  especially  warned  by  the  court, 
in  Mr.  Gould's  presence,  that  he  was  not  to  allow  his  charge 
to  go  out  of  his  sight.  This  difficulty  was  easily  surmounted. 
Mr.  Gould  went  by  an  early  train  to  Albany,  taking  the  officer 
with  him  in  the  capacity  of  a  travelling  companion.  Once  in 
Albany  he  was  naturally  taken  ill,  —  not  too  ill  to  go  to  the 
Capitol  in  the  midst  of  a  snow-storm,  but  much  too  ill  to 
think  of  returning  to  New  York.  On  the  10th  the  trusty 
official  and  travelling  companion  signified  to  Mr.  Gould  that 
his  presence  was  much  desired  before  Judge  Barrett,  and  inti- 
mated an  intention  of  caiTying  him  back  to  New  York.  Mr. 
Gould  then  pleaded  the  delicate  condition  of  his  health,  and 
wholly  declined  to  undergo  the  hardships  of  the  proposed  jour- 
ney. Whereupon  the  officer,  stimulated,  as  was  alleged,  by 
Gould's  opponents,  returned  alone  to  New  York,  and  reported 
his  charge  to  the  court  Jis  a  runaway.  A  new  spectacle  of  ju- 
dicial indignation  ensued,  and  a  new  process  for  contempt 
seemed  imminent.  Of  course  nothing  came  of  it.  A  few 
affidavits  from  Albany  pacified  the  indiiriiaut  Barrett.  The 
aj)plication  for  a  lutheaa  corpus  was  discharged,  and  Mr.  Gould 


A   CHAPTER   OF   ERIE.  51 

was  theoretically  returned  into  the  custody  of  the  sheriff. 
Thereupon  the  required  security  for  his  appearance  when 
needed  was  given ;  and  meanwhile,  pending  the  recovery  of  his 
health,  he  assiduously  devoted  the  tedious  hours  of  convales- 
cence to  the  tiisk  of  cultivating  a  thorough  understanding 
between  himself  and  the  members  of  the  legislature. 

A  strange  legislative  episode  occurred  at  this  time,  which 
for  a  day  or  two  threatened  to  thwart  Mr.  Gould's  operations, 
but  in  the  end  materially  facilitated  them.  All  through 
March  the  usual  sensational  charges  had  been  flying  through 
the  press  in  relation  to  the  buying  of  votes  on  the  pending 
Erie  measures.  These  were  as  vague  and  as  difficult  to  sus- 
tain as  usual,  and  it  was  very  important  that  no  indiscreet 
friend  of  legislative  purity  should  blunder  out  charges  which 
coiUd  be  triumphantly  refuted.  On  the  1st  of  April,  however, 
the  second  day  after  Mr.  Gould  appeared  on  the  ground,  a 
quiet  country  meml)er  named  Glenn,  remarkable  for  nothing 
but  his  advanced  years  and  white  hair,  suddenly  created  an 
intense  sensation  by  rising  in  his  place  in  the  Assembly  and 
excitedly  declaring  that  he  had  just  been  offered  money  for 
his  vote  on  the  Erie  Bill.  He  then  sent  up  to  the  Speaker 
charges  in  writing,  to  the  effect  that  the  recent  report  on  the 
bill  in  question  was  bought,  that  members  of  the  House  were 
engaged  in  purchasing  votes,  that  reports  of  committees  were 
habitually  sold,  and  ended  by  charging  "coiruptiou,  deep, 
dark,  and  damning  on  a  portion  of  the  House,"  of  which  he 
felt  "  degraded  in  being  a  member."  A  committee  of  investi- 
gation was,  of  course,  appointed,  and  the  press  congratulated 
the  public  that  at  last  specific  charges  had  been  advanced 
from  a  responsible  quarter.  On  the  9th  Mr.  Glenn  followed 
up  the  attack  by  charging,  again  in  writing,  that  one  member 
of  the  committee  of  investigation,  whose  name  he  gave,  was 
the  very  member  who  had  offered  him  money  for  his  vote. 
Mr.  Frear,  the  member  in  question,  at  once  resigned  his  place 
upon  the  committee,  and  demanded  an  investigation.  Then  it 
turned  out  that  the  simple  old  gentleman,  between  his  desire 
for  notoriety  and  his  eagerness  to  expose  corruption,  had  been 


52  A   CHAPTER   OF   ERIE. 

made  the  victim  of  a  cruel  joke.  Some  waggish  colleagues 
had  pointed  out  to  him  an  itinerant  Jew,  who  haunted  the 
lobby  and  sold  spectacles,  as  an  agent  of  the  fifth  estate. 
From  him  the  old  gentleman  had,  after  some  clumsy  angling 
and  many  leading  questions,  procured  what  he  supposed  to  be 
an  offer  of  money  for  his  vote,  which,  by  a  ludicrous  misun- 
derstanding, managed  by  his  humorous  colleagues,  was  made 
to  appear  in  his  eyes  as  having  I'eceived  Mi'.  Frear's  indorse- 
ment. Mr.  Glenn's  charges  ended,  therefore,  in  a  ridiculous 
fiasco,  and  in  a  tremendous  outburst  of  offended  legislative 
virtue.  The  committee  reported  on  the  10th  ;  every  one  was 
exonerated ;  Mr.  Glenn  was  brought  to  the  bar  and  censured, 
and  the  next  day  he  resigned.  As  for  the  astonished  pedler, 
he  was  banished  from  the  lobby,  imprisoned,  prosecuted,  and 
forgotten.  The  display  of  indignation  on  the  part  of  Mr. 
Glenn's  brother  legislators  was,  in  view  of  the  manifest  absur- 
dity of  the  whole  affair,  somewhat  superfluous  and  somewhat 
suspicious;  biit  one  such  false  accusation  protects  a  multitude 
of  real  sins.  The  trade  of  censor  of  morals  fell  into  disre- 
pute at  Albany  ;  and,  under  the  shadow  of  this  parody  upon 
exposures  of  corruption,  Mr.  Gould  was  at  liberty  to  devote 
himself  to  serious  business  without  fear  of  interruption. 

The  full  and  true  history  of  this  legislative  campaign  will 
never  be  known.  If  the  official  reports  of  investigating  com- 
mittees are  to  be  believed,  Mr.  Gould  at  about  this  time 
underwent  a  curious  psychological  metamorphosis,  and  sud- 
denly became  the  veriest  simpleton  in  money  matters  tfiat 
ever  fell  into  the  hands  of  happy  sharpers.  Cunning  lobby 
members  had  but  to  pretend  to  an  influence  over  legislative 
minds,  which  every  one  knew  they  did  not  possess,  to  draw 
unlimited  amounts  from  this  verdant  luibitue  of  Wall  Street. 
It  seemed  strange  that  he  could  liavc  lived  so  long  and  learned 
so  little.  He  dealt  in  large  sums.  He  gave  to  one  man,  in 
whom  he  said  "  he  did  not  take  nuich  stock,"  the  sum  of 
$5,000,  "just  to  smooth  him  over."  This  man  had  just  be- 
fore received  $  5,000  of  Erie  money  from  another  agent  of 
the  company.     It  would,  therefore,   be  interesting   to  know 


A   CHAPTER   OF   KRIE.  53 

what  sums  Mr.  Gould  paid  to  those  individuals  in  whom  he 
did  "take  much  stock."  Another  individual  is  reported  to 
have  received  $  100,000  from  one  side,  "to  influence  legisla- 
tion," and  to  have  subsequently  received  $  70,000  from  the 
other  side  to  disappear  witli  the  money  ;  which  he  accordingly 
did,  and  thereafter  became  a  gentleman  of  elegant  leisure. 
One  senator  was  openly  charged  in  the  columns  of  the  press 
with  receiving  a  bribe  of  $  20,000  from  one  side,  and  a  sec- 
ond bribe  of  $  15,000  from  the  other;  but  Mr.  Gould's  foggy 
mental  condition  only  enabled  him  to  be  "perfectly  astounded  " 
at  the  action  of  this  senator,  thovigh  he  knew  nothing  of  any 
such  transactions.  Other  senators  were  blessed  with  a  sudden 
accession  of  wealth,  but  in  no  case  was  there  any  jot  or  tittle 
of  proof  of  bribery.  Mr.  Gould's  rooms  at  the  Develin  House 
overflowed  with  a  joyous  company,  and  his  checks  were  nu- 
merous and  heavy  ;  but  why  he  signed  them,  or  what  became 
of  them,  he  seemed  to  know  less  than  any  man  in  Albany. 
This  strange  and  expensive  hallucination  lasted  until  about 
the  middle  of  April,  when  Mr.  Gould  was  happily  restored  to 
his  normal  condition  of  a  shrewd,  acute,  energetic  man  of 
business ;  nor  is  it  known  that  he  has  since  experienced  any 
relapse  into  financial  idiotcy. 

About  the  period  of  Mr.  Gould's  amval  in  Albany  the  tide 
turned,  and  soon  began  to  flow  strongly  in  favor  of  Erie  and 
against  Vanderbilt.  How  much  of  this  was  due  to  the 
skilful  manipulations  of  Gould,  and  how  much  to  the  rising 
popular  feeling  against  the  practical  consolidation  of  compet- 
ing lines,  cannot  be  decided.  The  popular  protests  did  indeed 
pour  in  by  scores,  but  then  again  the  Erie  secret-service  money 
])oured  out  like  water.  Yet  Mr.  Gould's  task  was  sufiiciently 
diflicult.  After  the  adverse  report  of  the  Senate  committee, 
and  the  decisive  defeat  of  the  bill  introduced  into  the  Assem- 
bly, any  favorable  legislation  seemed  almost  hopeless.  Both 
Houses  were  committed.  Vanderbilt  had  but  to  prevent  ac- 
tion, —  to  keep  things  where  they  were,  and  the  return  of  his 
opponents  to  New  York  was  impracticable,  unless  with  his 
consent ;  he  appeared,  in  fact,  to  be  absolute  master  of  the 


54  A   CHAPTER   OF   ERIE.  . 

situatiou.  It  seemed  almost  impossible  to  introduce  a  bill  in 
the  face  of  his  great  influence,  and  to  navigate  it  through  the 
many  stages  of  legislative  action  and  executive  approval, 
without  somewhere  giving  him  an  opportunity  to  defeat  it. 
This  was  the  task  Gould  had  before  him,  and  he  accomplished 
it.  On  the  13th  of  April  a  bill,  which  met  the  approval  of 
the  Erie  party,  and  which  Judge  Bai-nard  subsequently  com- 
pared not  inaptly  to  a  bill  legalizing  counterfeit  money,  was 
taken  up  in  the  Senate  ;  for  some  days  it  was  warmly  debated, 
and  on  the  18th  was  passed  by  the  decisive  vote  of  seventeen 
to  twelve.  Senator  Mattoon  had  not  listened  to  the  debate 
in  vain.  Perhaps  his  reason  was  convinced,  or  perhaps  he 
had  sold  out  new  "  points  "  and  was  again  cheating  himself  or 
somebody  else  ;  at  any  rate,  that  thrifty  senator  was  found 
voting  with  the  majoritj'.  The  bill  practically  legalized  the 
recent  issues  of  bonds,  but  made  it  a  felony  to  use  the  pro- 
ceeds of  the  sale  of  these  bonds  except  for  completing,  fur- 
thering, and  operating  the  road.  The  guaranty  of  the  bonds 
of  connecting  roads  was  authorized,  all  contracts  for  consoli- 
dation or  division  of  receipts  between  the  Erie  and  the  Van- 
derbilt  roads  were  forbidden,  and  a  clumsy  provision  was 
enacted  that  no  stockholder,  director,  or  officer  in  one  of  the 
Vandcrbilt  roads  should  be  an  officer  or  director  in  the  Erie, 
and  vice  versa.  The  bill  was,  in  fact,  an  amended  copy  of  the 
one  voted  down  so  decisively  in  the  Assembly  a  few  days 
before,  and  it  was  in  this  body  that  the  tug  of  war  was  expected 
to  come. 

The  lobby  was  now  full  of  animation  ;  fabulous  stories 
were  told  of  the  amounts  which  the  contending  parties  were 
willing  to  expend  ;  never  before  had  the  market  quotations  of 
votes  and  influence  stood  so  high.  The  wealth  of  Vanderbilt 
seemed  pitted  against  the  Erie  treasury,  and  the  vultures 
flocked  to  Albany  from  every  ])art  of  the  State.  Suddenly, 
at  tiie  very  last  moment,  and  even  while  special  trains  were 
bringing  up  fresh  contestants  to  take  part  in  the  fray,  a  nunor 
rjfn  through  Albany  as  of  some  great  public  disaster,  spread- 
ing panic  and  ten-or  through  hotel  and  corridor.     The  ob- 


A   CHAPTER   OF   ERIE.  55 

server  was  reminded  of  the  dark  days  of  the  war,  when  tid- 
ings came  of  some  great  defeat,  as  that  on  the  Chickahominy 
or  at  Fredericksburg.  In  a  moment  the  lobby  was  smitten 
with  despair,  and  the  cheeks  of  the  legislators  were  blanched, 
for  it  was  reported  that  Vanderbilt  had:  withdrawn  his  opposi- 
tion to  the  bill.  The  report  was  true.  Either  the  Commo- 
dore had  counted  the  cost  and  judged  it  excessive,  or  be  de- 
spaired of  the  result.  At  any  rate,  he  had  yielded  in  advance. 
In  a  few  moments  the  long  struggle  was  over,  and  that  bill 
which,  in  an  unamended  fomi,  had  but  a  few  days  before  been 
thrown  out  of  the  Assembly  by  a  vote  of  eighty-three  to 
thirty-two,  now  passed  it  by  a  vote  of  one  hundred  and  one  to 
six  and  was  sent  to  the  Governor  for  his  signature.  Then  the 
wrath  of  the  disappointed  members  turned  on  Vanderbilt. 
Decency  was  forgotten  in  a  frenzied  sense  of  disappointed 
avarice.  That  same  night  the  pro  rata  freight  bill,  and  a  bill 
compelling  the  sale  of  through  tickets  by  competing  lines, 
were  hurriedly  passed,  simply  because  they  were  thought 
hurtful  to  Vanderbilt ;  and  the  docket  was  ransacked  in 
search  of  other  measures,  calculated  to  injure  or  annoy  him. 
An  adjournment,  however,  brought  reflection,  and  subse- 
quently, on  this  subject,  the  legislature  stultified  itself  no 
more. 

The  bill  had  passed  the  legislature  ;  would  it  receive  the 
Executive  signature]  Here  was  the  last  stage  of  danger. 
For  some  time  doubts  were  entertained  on  this  point,  and  the 
last  real  conflict  between  the  opposing  interests  took  place  in 
the  Executive  Chamber  at  Albany.  There,  on  the  .afternoon 
of  the  21st  of  April,  Commodore  Vanderbilt's  counsel  ap- 
peared before  Governor  Fenton,  and  urged  upon  him  their 
reasons  why  the  bill  should  be  returned  by  him  to  the  Senate 
without  his  signature.  The  arguments  were  patiently  listened 
to,  but,  when  they  had  closed,  the  Executive  signature  placed 
the  seal  of  success  upon  Mr.  Gould's  labors  at  Albany.  Even 
here  the  voice  of  calumny  was  not  silent.  As  if  this  remark- 
able controversy  was  destined  to  leave  a  dark  blot  of  suspi- 
cion upon  every  department  of  the  civil  service  of  New  York, 


56  A   CHAPTER   OF   ERIE. 

there  were  not  wanting  those  who  charged  the  Executive 
itself  with  the  crowning  act  in  this  history  of  corruption.  The 
very  sum  pretended  to  have  been  paid  was  named  ;  the  broker 
of  Executive  action  was  pointed  out,  and  the  number  of  min- 
utes was  specified  which  should  intervene  between  the  pay- 
ment of  the  bribe  and  the  signing  of  the  law.* 

Pi'actically,  the  conflict  was  now  over,  and  the  period  of 
negotiation  had  already  begun.  The  combat  in  the  courts 
was  indeed  kept  up  until  far  into  May,  for  the  angry  passions 
of  the  lawyers  and  of  the  judges  required  time  in  which  to 
■wear  themselves  out.  Day  after  day  the  columns  of  the  press 
revealed  fresh  scandals  to  the  astonished  public,  which  at  last 
grew  indifferent  to  siich  revelations.  Beneath  all  the  wrangling 
of  the  courts,  however,  while  the  popular  attention  was  dis- 
tracted by  the  clatter  of  lawyers'  tongues,  the  leaders  in  the 
controversy  were  quietly  approaching  a  settlement.  In  the 
early  days  of  his  exile  Mr.  Drew  had  been  more  depressed  in 
spirit,  more  vacillating  in  comisel,  than  his  younger  and  more 
robust  associates.  The  publicity  and  excitement  which  had 
sustained  and  even  amused  them,  had  wearied  and  annoyed 
the  old  man.  {lis  mind  jiad  been  oppressed  \Vith  saucy  doubts 
and  tormented  by  officious  advisers.  Stronger  wills  than  his 
were  bearing  him  along  with  them ;  and  though,  perhajis,  not 
more  scnipnlous  than  those  about  him,  he  was  certainly  less 
bold  ;  their  reckless  daring  shocked  his  more  subtle  and  timid 
nature.  He  missed  also  his  home  comforts ;  he  felt  himself  a 
prisoner  in  everything  but  in  name ;  he  knew  that  he  was 
distrusted,  and  his  every  action  watched  by  associates  of  whom 
he  even  stood  in  physical  fear,  who  hardly  allowed  him  to  see 
his  brokers  alone,  and  did  not  respect  the  sanctity  of  his  tele- 
gi-ams.  After  the  first  week  or  two,  and  as  affiiirs  began  to 
assume  a  less  untoward  aspect,  his  spirits  revived,  and  he  soon 
began  to  make  secret  advances  towards  his  angry  opponent. 

•  It  is  but  justice  to  Governor  Fcnton  to  say,  that,  though  this  charge  was 
hoMly  advanced  by  respectable  journals  of  his  own  party,  it  cannot  be  con- 
siilered  as  sustained  by  the  evidence.  The  testimony  on  the  jwint  will  be 
found  in  the  report  of  Senator  Hale's  invostignting  committee.  Document.s 
(Senate),  IJ'CO,  No.  62,  pp.  140-  148,  151-156. 


A   CHAPTER   OF   EKIE.  57 

The  hostilities  of  the  Stock  Exchange  are  proverbially  short- 
lived. A  broker  skilled  in  the  ways  of  his  kind  gave  it  as  his 
opinion,  in  one  of  these  proceedings,  that  five  minutes  was 
the  utmost  period  during  which  it  was  safe  to  count  on  the 
enmities  or  alliances  of  leading  operators.  Early  in  April 
Mr.  Drew  took  advantage  of  that  blessed  immunity  from 
arrest  which  the  Sabbath  confers  on  the  hunted  of  the  law,  to 
revisit  the  familiar  scenes  aci'oss  the  river.  His  visit  soon 
resulted  in  conferences  between  himself  and  Vanderbilt,  and 
these  conferences  naturally  led.  to  overtures  of  peace.  Though 
the  tide  was  turning  against  the  great  railroad  king,  though 
an  uncontrollable  popular  feeling  was  fast  bearing  down  his 
schemes  of  monopoly,  yet  he  was  by  no  means  beaten  or  sub- 
dued. His  plans,  however,  had  evidently  failed  for  the  pres- 
ent ;  as  he  expressed  himself,  he  could  easily  enough  buy  up 
the  Erie  Railway,  but  he  could  not  buy  up  the  printing-press. 
It  was  now  clearly  his  interest  to  abandon  his  late  line  of  at- 
tack, and  to  bide  his  time  patiently,  or  to  possess  himself  of  his 
prey  by  some  other  method.  The  wishes  of  all  parties,  there- 
fore, were  fixed  on  a  settlement,  and  no  one  was  disposed  to 
stand  out  except  in  order  to  obtain  better  terms.  The  inter- 
ests, however,  were  multifarious.  There  were  four  parties  to 
be  taken  care  of,  and  the  depleted  treasury  of  the  Erie  Kail- 
way  was  doomed  to  suffer. 

The  details  of  this  masterpiece  of  Wall  Street  diplomacy 
have  never  come  to  light,  but  Mr.  Drew's  visits  to  New  York 
became  more  frequent  and  less  guarded ;  by  the  middle 
of  April  he  had  appeared  in  Broad  Street  on  a  week-day,  un- 
disturbed by  fears  of  arrest,  and  soon  rumors  began  to  spread 
of  misunderstandings  between  himself  and  his  brother  exiles. 
It  was  said  that  his  continual  absences  alarmed  them,  that 
they  distrusted  him,  that  his  terms  of  settlement  were  not 
theira.  It  was  even  asserted  that  his  orders  on  the  treasury 
were  no  longer  honored,  and  that  he  had,  in  fact,  ceased  to  be 
a  power  in  Erie.  Whatever  truth  there  may  have  been  in 
these  rumors,  it  was  very  evident  his  associates  had  no  inclina- 
tion to  trust  themselves  within  the  reach  of  the  New  York 
3* 


58  A  CHAPTER   OF  ERIE. 

courts  until  a  definitive  treaty,  satisfactory  to  themselves,  was 
signed  and  sealed.  Thiis  probably  took  place  about  the  25th 
of  April ;  for  on  that  day  the  Erie  camp  at  "  Fort  Taylor,"  as 
their  uninviting  hotel  had  been  dubbed,  was  broken  up,  the 
President  and  one  of  the  Executive  Committee  took  steamer 
for  Boston,  and  the  other  directors  appeared  before  Judge 
Barnard,  prepared  to  purge  themselves  of  their  contempt. 

Though  the  details  of  negotiation  have  never  been  divulged, 
yet  it  was  clear  enough  what  three  of  the  four  parties  desired. 
Commodore  Vanderbilt  wished  to  be  relieved  of  the  vast 
amount  of  stock  with  which  he  was  loaded,  and  his  friends 
Work  and  Schell,  in  whose  names  the  battle  had  been  fought, 
must  be  protected.  Mr.  Drew  desired  to  settle  his  entangled 
accounts  as  treasurer,  and  to  obtain  a  release  in  full,  wliich 
might  be  pleaded  in  future  complications.  Mr.  Eldridge  and 
his  Boston  friends  were  sufficiently  anxious  to  be  relieved 
of  the  elephant  they  found  on  their  hands,  in  the  Erie  Rail- 
way of  New  York,  and  to  be  at  leisure  to  devote  the  spoils 
of  their  victim  to  the  development  of  their  New  England  en- 
terprise. Messrs.  Gould  and  Fisk  alone  were  unprovided  for, 
and  they  alone  presented  themselves  as  obstacles  to  be  over- 
come by  railroad  diplomacy. 

At  last,  upon  the  2d  of  July,  Mr.  Eldridge  formally  an- 
nounced to  the  Board  of  Directors  that  the  terms  of  peace 
had  been  agreed  upon.  Commodore  Vanderbilt  was,  in  the 
first  place,  provided  for.  He  was  to  be  relieved  of  fifty  thou- 
sand shares  of  Erie  stock  at  70,  receiving  therefor  $2,500,000 
in  cash,  and  $  1,250,000  in  bonds  of  the  Boston,  Hartford,  & 
Erie  at  80.  He  was  also  to  receive  a  further  sum  of  $  1,000,000 
outright,  as  a  consideration  for  the  privilege  the  Erie  road 
thus  purchased  of  calling  upon  him  for  his  remaining  fifty 
thousand  shares  at  70  iit  any  time  within  four  months.  Ho 
Wiis  also  to  have  two  seats  in  the  Bi>ar(l  of  Directors,  and  all 
suits  were  to  be  dismissed  and  offences  condoned.  The  sum 
of  $  429,250  was  fixed  upon  as  a  j)roper  amount  to  assuage 
the  sense  of  wrong  from  wiiich  his  two  friends  Work  and 
Schell  had  suffered,  and  to  efface  from  their  memories  all 


A    CHAPTER   OF   ERIE.  59 

recollection  of  the  iinfortuatc  "  pool "  of  the  previous  Decem- 
ber. Why  the  owners  of  the  Erie  Railway  should  have  paid 
this  indemnity  of  $  4,000,000  is  not  very  clear.  The  opera- 
tions were  apparently  outside  of  the  business  of  a  railway 
company,  and  no  more  coimected  with  the  stockholdera  of  the 
Erie  than  were  the  butchers'  bills  of  the  individual  directors. 

While  Vanderbilt  and  his  friends  were  thus  provided  for, 
Mr.  Drew  was  to  be  left  in  undisturbed  enjoyment  of  the  fruits 
of  his  recent  operations,  but  was  to  pay  into  the  treasury 
$  540,000  and  interest,  in  full  discharge  of  all  claims  and 
causes  of  action  which  the  Erie  Company  might  have  against 
him.  The  Boston  party,  as  represented  by  Mr,  Eldridge,  was 
to  be  relieved  of  $5,000,000  of  their  Boston,  Hartford,  & 
Erie  bonds,  for  which  they  were  to  receive  $  4,000,000  of  Erie 
acceptances.  None  of  these  parties,  therefore,  had  anything 
to  complain  of,  whatever  might  be  the  sensations  of  the  real 
owners  of  the  railway.  A  total  amount  of  some  $  9,000,000  in 
cash  was  drawn  from  the  treasury  in  fulfilment  of  this  settle- 
ment, as  the  persons  concerned  were  pleased  to  term  this 
remarkable  disposition  of  property  intrusted  to  their  care. 

Messrs.  Gould  and  Fisk  still  remained  to  be  taken  care 
of,  and  to  them  their  associates  left  —  the  Erie  Railway.  These 
gentlemen  subsequently  maintained  that  they  had  vehemently 
opposed  this  settlement,  and  had  denounced  it  in  the  secret 
councils  as  a  fraud  and  a  robbery.  Mr.  Fisk  was  peculiarly 
outspoken  in  relation  to  it,  and  declared  himself  "  thunder- 
struck and  dumbfounded  "  that  his  brother  directors  whom  he 
had  supposed  respectable  men  should  have  had  anything  to 
do  with  any  such  proceeding.  A  small  portion  of  this  state- 
ment is  not  wholly  improbable.  The  astonishment  at  the 
turpitude  of  his  fellow-officials  was  a  little  unnecessary  in  one 
who  had  already  seen  "  more  robbery  "  during  the  year  of  his 
connection  with  the  Eric  Railway  than  he  had  "  ever  seen  before 
in  the  same  space  of  time,"  —  so  much  of  it  indeed  that  he 
dated  his  "  gi-ay  hairs  "  from  that  7th  of  October  which  saw 
his  election  to  the  board.  That  Mi'.  Fisk  and  Mr.  Gould  wore 
extremely  indignant  at  a  partition  of  plunder  from  which  they 


60  A    CHAPTER    OF   ERIE. 

were  excluded  is,  however,  very  certain.  The  riud  of  the 
orange  is  not  generally  considered  the  richest  part  of  the  fruit ; 
a  corporation  on  the  verge  of  bankruptcy  is  less  coveted,  even 
by  operators  in  Wall  Sti'eet,  than  one  rich  in  valuable  assets. 
Probably  at  this  time  these  gentlemen  seriously  debated  the 
exjiediency  of  resorting  again  to  a  war  of  injunctions,  and 
carefully  kept  open  a  way  for  doing  so ;  however  this  may 
have  been,  they  seem  finally  to  have  concluded  that  there  was 
yet  plunder  left  in  the  poor  old  hidk,  and  so,  after  four  stormy 
interviews,  all  opposition  was  at  last  withdrawn  and  the  de- 
finitive treaty  was  finally  signed.*  Mi*.  Eldridge  thereupon 
counted  out  his  bonds  and  received  his  acceptances,  which 
latter  were  cashed  at  once  to  close  up  the  transaction,  and  at 
once  he  resigned  his  positions  as  director  and  president.  The 
Boston  raiders  then  retired,  heavy  with  spoil,  into  their  owm 
North  country,  and  there  pi'oceeded  to  build  up  an  Erie  influ- 
ence for  New  England,  in  which  task  tliey  labored  with  assidu- 
ity and  success.  Gradually  they  here  introduced  the  more 
highly  developed  civilization  of  the  laud  of  their  temporary 
adoption  and  boldly  attempted  to  make  good  their  private 
losses  from  the  public  treasury.  A  more  barefaced  scheme 
of  plunder  never  was  devised,  and  yet  the  executive  veto 
alone  stood  between  it  and  success.     These,  however,  were  the 

*  The  account  given  of  this  nffnir  by  Mr.  Fisk  from  the  witness  stand  on  a 
subsequent  occasion  was  characteristic  :  "  Finally  about  twelve  o'clock  a 
paper  was  ])assed  rouiul  and  we  signed  it;  I  don't  know  what  it  contained;  I 
did  n't  read  it;  I  don't  think  I  noticed  a  word  of  it;  I  remember  the  .«])ace  for 
the  names  was  greater  than  that  covered  by  the  writing;  my  impression  is 
that  I  took  my  hat  and  left  at  once  in  disgust;  I  told  Gould  we  had  sold  our- 
selves to  the  Devil;  I  presume  that  was  not  the  only  document  signed;  I  re- 
member seeing  Mr.  White,  the  cashier,  come  in  with  the  check-book,  and  I 
said  to  him,  'You  are  bearing  in  the  remains  of  this  corporation  to  be  put  in 
Vnnderbilt's  tomb.'  No;  I  did  n't  know  the  contents  of  the  paper  which  I 
signed,  and  I  have  always  been  glad  that  I  flid  n't;  I  have  thought  of  it  a  thou- 
sand times;  I  don't  know  what  otiier  documents  I  signed  ;  I  signed  everytiiing 
that  was  put  before  me;  after  once  the  Devil  had  hold  of  me  1  kept  on  signing; 
did  n't  read  any  of  them  and  have  no  idea  what  they  were;  I  don't  know  how 
many  I  signed;  I  keytt  no  comit  after  the  first  one;  I  went  with  the  robbers 
then  and  I  have  been  with  thoni  ever  since;  my  imi)ressi(>n  is  that  after  the 
signing  1  left  at  oncfs  I  don't  know  whether  we  sat  down  or  not;  we  didn't 
have  anything  to  eat,  I  know." 


A   CHAPTER   OF   ERIE.  61 

events  of  another  year  and  unconnected  with  this  narrative, 
from  which  these  characters  in  the  Erie  management  hence- 
forth disappear.  For  the  rest  it  is  only  necessary  to  say  that 
]\Ir.  Vanderbilt,  relieved  of  his  heavy  load  of  its  stock,  ap- 
parently ceased  to  concern  himself  with  Erie  ;  while  Daniel 
Drew,  released  from  the  anxieties  of  office,  assumed  for  a 
space  the  novel  character  of  a  looker-on  in  Wall  Street. 


III. 

Thus,  in  the  early  days  of  July,  Messrs.  Fisk  and  Gould 
found  themselves  beginning  life,  as  it  were,  in  absolute  control 
of  the  Erie  Railway,  but  with  an  empty  treasury  and  a  doubt- 
ful reputation.  Outwardly  things  did  not  look  unpromising. 
The  legal  complications  were  settled,  and  the  fearful  load 
imposed  by  the  settlement  upon  the  already  overburdened 
resources  of  the  road  was  not,  of  course,  imparted  to  the  pub- 
lic. It  is  unnecessary  to  add  that  the  "outside"  holders 
of  the  stock  were,  in  the  counsels  of  the  managers,  included 
in  that  public  the  inquiries  of  which  in  regard  to  the  affiiirs 
of  the  company  were  looked  upon  by  the  ring  in  control  as 
downright  impertinence.  A  calm  —  deceitful  indeed,  but  yet 
a  calm  —  succeeded  the  severe  agitations  of  the  money  mar- 
ket. All  throiigh  the  month  of  July  money  was  easy  and 
ruled  at  three  or  four  per  cent ;  Erie  was  consequently  high, 
and  was  quoted  at  about  seventy,  which  enabled  the  company 
to  dispose  without  loss  of  the  Vanderbilt  stock.  It  may  well 
bo  believed  that  Messrs.  Fisk  and  Gould  could  not  have  i-c- 
garded  their  empty  treasurj-^,  jtist  depleted  to  the  e.xtent  of 
nine  millions,  —  trust  funds  misapplied  by  directors  in  the  pro- 
cesses of  stock-gambling,  —  without  serious  question  as  to  their 
ability  to  save  the  road  from  bankruptcy.  The  October  elec- 
tion was  approaching,  Vaudei'bilt  was  still  a  threatening  ele- 
ment   in    the    future,    suid    new   combinations   might   arise. 


62  A   CHAPTKR   OF   ERIE. 

Millions  were  necessary,  and  must  at  once  be  forthcoming. 
The  new  officials  were,  however,  men  of  resonrce,  and  were 
not  men  of  many  scruples.  The  money  must  be  raised,  and 
recent  experience  indicated  a  method  of  raising  it.  Their 
policy,  freed  from  the  influence  of  Drew's  vacillating,  treach- 
erous, and  withal  timid  nature,  could  now  be  bold  and  direct. 
The  pretence  of  resistance  to  monopoly  would  always  serve 
them,  as  it  had  served  them  before,  as  a  plausible  and  popular 
cry.  Above  all,  their  councils  were  now  free  from  interlopers 
and  spies  ;  for  the  first  act  of  Messrs.  Could  and  Fisk  had  been 
to  do  away  with  the  old  board  of  auditors,  and  to  coucoutrate 
all  power  in  their  own  hands  as  president,  treasurer,  and  con- 
troller. Fortunately  for  them  it  was  midsummer,  and  the 
receipts  of  the  road  were  very  heavy,  supplying  them  with 
large  sums  of  ready  money  ;  *  most  fortunately  for  them,  also, 
a  strange  infatuation  at  this  time  took  possession  of  the  Eng- 
lish mind. 

*  It  will  be  remembered  that  the  act  of  21st  April,  lej^lizi-g  tlic  issue  of 
bonds,  made  it  a  felony  to  devote  the  proceeds  to  any  purpose  except  equip- 
ping, cocstructirg,  and  operating  the  road.  Mr.  Gould's  exp1a  ation  of  the 
effect  he  gave  to  this  clause  is  not  only  amusing  as  a  piece  of  inipu^eni-e,  but 
extremely  suggestive  as  regards  the  efficacy  of  legislation.  Mr.  Gould,  be  it 
remembered,  procurei  the  passage  of  the  law,  and  Mr.  GouH  thus  explains  to 
the  railroad  committee  of  the  legislature  the  force  he  gave  to  its  provisions. 

Mr.  Gould.  ....  The  law  is,  that  you  can  only  use  the  money  realized  on 
these  bonds  for  the  purpose  of  equipping,  constructing,  and  operating  theroa-l, 
and  therefore  I  had  to  use  the  earnings  of  the  road  to  meet  these  largo  liabili- 
ties, which  had  been  authorizel  by  the  board  (the  Eldridge-Vanderbilt  settle- 
ment ),  and  use  the  money  realized  from  the  bonds  to  equip,  construct,  and 
operate  the  road 

Qutsiion  by  Mr.  Wnlermnn.  In  fact  these  twenty  million  of  bonds  were 
issued  to  meet  these  obligations,  and  not  for  the  purpose  of  maintaining,  oper- 
ating, and  constnictiog  the  road  ? 

Answer.  No,  sir;  I  used  the  earnings  of  the  road  to  meet  these  obligations. 
....  We  liad  to  live  up  to  the  letter  of  the  law,  and  use  the  money  realized 
from  the  bonds  for  the  purpose  of  operating,  constructing,  and  equipping  the 
road. 

Q.  Rut  your  pressi-g  need  of  money  was  not  for  the  purpose  of  operating 
the  road,  but  for  the  purpose  of  meeting  these  obligations? 

A.  Yes,  sir. 

Q  I'ho  amouut  of  money  you  sought  to  raise  was  the  amount  of  those 
obligations? 

A.  Yc8,  sir. 


A   CHAPTER   OF   ERIE:  63 

Shrewd  as  the  British  capitalist  proverbially  is,  his  judg- 
ment iu  regard  to  American  investments  has  been  singularly 
fallible.  When  our  national  bonds  went  begging  at  a  discount 
of  sixty  per  cent,  he  transmitted  them  to  Germany  and  refused 
to  touch  them  himself.  At  the  very  same  time  a  class  of  rail- 
road securities  ^ —  such  as  those  of  this  very  Erie  Railway,  or, 
to  cite  a  yet  stronger  case,  those  of  the  Atlantic  &  Great  West-  ■ 
ern  road  — was  gi*adually  absorbed  in  London  as  an  honest  in- 
vestment long  after  these  securities  had  "  gone  into  the  street " 
in  America.  It  was  this  strange  fatuity  which  did  much  to 
bring  on  the  crash  of  May,  1866.  Even  that  did  not  seem  to 
teach  wisdom  to  the  British  bankers,  who  had  apparently 
passed  from  the  extreme  of  caution  to  the  extreme  of  confi- 
dence. They  now,  after  all  the  exposures  of  the  preceding 
months,  rushed  into  Erie,  apparently  because  it  seemed  cheap, 
and  the  prices  iu  New  York  were  sustained  by  the  steady  de- 
mand for  stock  on  foreign  account.  Not  only  did  this  curious 
infatuation,  involving  purchases  to  the  extent  of  a  hundred 
thousand  shares,  cover  up  the  operations  of  the  new  ring,  but, 
at  a  later  period,  the  date  of  the  possible  return  of  this  stock 
to  Wall  Street  was  the  hinge  on  which  the  success  of  its  cul- 
minating plot  was  made  to  turn. 

The  appearance  of  calm  lasted  but  about  thirty  days. 
Early  in  August  it  was  evident  that  something  was  going  on. 
Erie  suddenly  fell  ten  per  cent;  in  a  few  days  more  it  experi- 
enced a  further  fall  of  seven  per  cent,  touching  44  by  the  1 9th 
of  the  month,  upon  which  day,  to  the  astonishment  of  Wall 
Street,  the  transfei'-books  of  the  company  were  closed  pre- 
paratory to  the  annual  election.  As  this  election  was  not  to 
take  place  imtil  the- 13th  of  October,  and  as  the  books  had 
thus  been  closed  thirty  days  in  advance  of  the  usual  time,  it 
looked  very  much  as  thoiigh  the  managers  were  satisfied  with 
the  present  disposition  of  the  stock,  and  meant,  by  keeping  it 
where  it  was,  to  preclude  any  such  unpleasantness  as  aa 
opposition  ticket.  The  courts  and  a  renewed  war  of  injunc- 
tions were  of  course  open  to  any  contestants,  including  Com- 
modore Vandorbilt,  who  might  desire  to  avail  themselves  of 


64  A   CHArTER   OF   ERIE. 

them  ;  probably,  however,  the  memory  of  recent  struggles 
was  too  fresh  to  permit  any  one  to  embark  on  those  treacher- 
ous waters.  At  any  rate,  nothing  of  the  sort  was  attempted. 
The  election  took  place  at  the  usual  time,  and  the  ring  in 
control  voted  itself,  without  opposition,  into  a  new  lease  of 
power.  Two  new  names  had  meanwhile  appeared  in  the  list 
of  Erie  directors,  —  those  of  Peter  B.  Sweeney  and  William  M. 
Tweed,  the  two  most  prominent  leaders  of  that  notorious 
ring  which  controls  the  proletariat  of  New  York  City  and 
governs  the  politics  of  the  State.  The  alliance  was  an  omi- 
nous one,  for  the  construction  of  the  new  board  can  be  stated 
in  few  words,  and  calls  for  no  comment.  It  consisted  of  the 
Erie  ring  and  the  Tammany  ring,  brought  together  in  close 
political  and  financial  union ;  and,  for  the  rest,  a  working 
majority  of  supple  tools  and  a  hopeless  minority  of  respect- 
able figure-heads.  This  formidable  combination  shot  out  its 
feelei-s  far  and  wide  :  it  wielded  the  influence  of  a  great  cor- 
poration with  a  capital  of  a  hundred  millions  ;  it  controlled 
the  politics  of  the  first  city  of  the  New  World  ;  it  sent  its 
representatives  to  the  Senate  of  the  State,  and  numl>ered 
among  its  agents  the  judges  of  the  courts.  Compact,  disci- 
plined, and  reckless,  it  knew  its  own  power  and  would  not 
scruple  to  use  it. 

It  was  now  the  month  of  October,  and  the  harvest  had  been 
gathered.  The  ring  and  its  allies  determined  to  reap  their 
harvest  also,  and  that  harvest  was  to  be  nothing  less  than  a 
contribution  levied,  not  only  upon  Wall  Street  and  New  York, 
but  upon  all  the  immense  interests,  commercial  and  financial, 
which  radiate  from  New  York  all  over  the  country.  Like  the 
Crcsar  of  old,  they  issued  their  edict  that  all  tlie  world  should 
be  taxed.  The  process  was  not  novel,  but  it  was  eflective.  A 
monetary  stringency  may  be  looked  for  in  New  York  at  cer- 
tain seasons  of  every  year.  It  is  genenilly  most  severe  in  tlic 
autumn  months,  when  the  crops  l)ave  to  be  moved,  and  the 
currency  is  drained  steadily  away  from  the  financial  centre 
towards  the  extremities  of  the  system.  The  method  by  which 
an  artificial  stringency  is  produced  is  thus  explained   in  a 


A   CHAPTER   OF   ERIE.  65 

recent  report  of  the  Comptroller  of  the  Currency  :  "  It  is 
scarcely  possible  to  avoid  the  inference  that  nearly  one  half 
of  the  available  resom-ces  of  the  national  banks  in  the  city  of 
New  York  are  used  in  the  operations  of  the  stock  and  gold  ex- 
change ;  that  they  are  loaned  upon  the  security  of  stocks 
whicii  are  bought  and  sold  largely  on  speculation,  and  which 
are   manipulated   by  cliques  and  combinations,   according  as 

the  bulls  or  bears  are  for  the  momeut  in  the  ascendency 

Taking  advantage  of  an  active  demand  for  money  to  move  the 
croi)S  West  and  South,  shrewd  operators  form  their  combina- 
tion to  depress  the  market  by  '  locking  xip  '  money,  —  with- 
drawing all  they  can  control  or  borrow  from  the  common 
fund ;  money  becomes  scarce,  the  rate  of  interest  advances, 
and  stocks  decline.  The  legitimate  demand  for  money  con- 
tinues ;  and,  fearful  of  trenching  on  their  reserve,  the  banks 
are  strained  for  means.  They  dare  not  call  in  their  demand 
loans,  for  that  would  compel  tiieir  customers  to  sell  securities 
on  a  falling  market,  which  would  make  matters  worse.  Habi- 
tually lending  their  means  to  the  utmost  limit  of  prudence, 
and  their  credit  much  beyond  that  limit,  to  brokers  and  specu- 
lators, they  are  powerless  to  afford  relief ;  —  their  customers 
by  the  force  of  circumstances  become  their  masters.  The 
banks  cannot  hold  back  or  withdraw  from  the  dilemma  in 
which  their  mode  of  doing  business  has  placed  them.  They 
must  caiTy  the  load  to  save  their  margins.  A  panic  which 
should  gi-eatly  reduce  the  price  of  secm-ities  would  occasion 
serious,  if  not  fatal,  results  to  the  banks  most  extensively 
engiiged  in  such  operations,  and  woiild  produce  a  feeling  of 
insecurity  which  woidd  be  very  dangerous  to  the  entire  bank- 
ing interest  of  the  country."  * 

All  this  machinery  was  now  put  in  motion  ;  the  banks  and 
their  customers  were  forced  into  the  false  position  described, 
and  towards  the  end  of  October  it  had  become  ])erfectly  no- 
torious in  Wall  Street  that  large  new  issues  of  Erie  had  been 
made,  and  that  these  new  issues  were  intimately  connected 
with  the  shai-p  stringency  then  existing  in  the  money  market. 

•  Finance  Report,  1868,  pp.  20,  21. 


66  A   CHAPTER   OF  ERIE. 

It  was  at  last  determined  to  investigate  tlie  matter,  and  upon 
the  27th  of  the  month  a  committee  of  three  was  appointed 
by  the  Stock  Exchange  to  wait  upon  the  officers  of  the  cor- 
poration with  the  view  of  procuring  such  infoi'mation  as  they 
might  be  willing  to  impait.  The  committee  called  on  Mr. 
Could  and  stated  the  object  of  their  visit.  In  reply  to  their 
inquiries  Mr.  Gould  informed  them  that  Erie  convertible  bonds 
for  ten  millions  of  dollars  had  been  issued,  half  of  which  had 
already  been,  and  the  rest  of  which  would  be,  converted  into 
stock ;  that  the  money  had  been  devoted  to  the  purchase  of 
Boston,  Hartford,  &  Erie  bonds  for  five  millions,  and  also  — 
of  course  —  to  payments  for  steel  rails.  The  committee  de- 
sired to  know  if  any  further  issue  of  stock  was  in  contempla- 
tion, but  were  obliged  to  rest  satisfied  with  a  calm  assurance 
that  no  new  issue  was  just  then  contemplated  except  "  in  cer- 
tain contingencies  "  ;  from  which  enigmatical  utterances  Wall 
Street  was  left  to  infer  that  the  exigencies  of  Messra.  Gould 
and  Fisk  were  elements  not  to  be  omitted  from  any  calcula- 
tions as  to  the  future  of  Erie  and  the  money  market.  The 
amount  of  these  issues  of  new  stock  was,  of  course,  soon 
whispered  in  a  general  way  ;  but  it  was  not  till  months  after- 
wards that  a  sworn  statement  of  the  secretary  of  the  Erie 
Ilailway  revealed  the  fact  that  the  stock  of  the  corporation 
had  been  increased  from  $34,205,300  on  the  1st  of  July, 
1868,  the  date  when  Drew  and  his  associates  had  left  it,  to 
$57,706,300  on  the  24th  of  October  of  the  same  year,  or  by 
two  hundred  and  thirty-five  thousand  shares  in  four  months.* 
This,  too,  had  been  done  without  consultation  with  the  board 
of  directore,  and  with  no  other  authority  than  that  coufeired 
by  the  ambiguous  resolution  of  February  19.  Under  that 
resolution  the  stock  of  the  company  hail  now  been  increased 

•  In  April,  1871,  nlthongh  the  stock  was  then  nominnlly  registered,  a  fur- 
ther secret  issue  was  made  by  wliicli  some  $  600,000  ia  casli  was  realized  on 
$8,000,000  of  stock.  Periodical  issues  had  then  carriel  the  gross  amount  up  to 
the  neighborhoftd  of  $86,500,000;  or  from  a  total  of  250,000  shares,  when  the 
management  changed  at  the  election  of  October  17,  1?67,  to  865,000  shares 
within  four  years.  Apparently  Mr  Fisk  was  more  correct  than  usual  in  his 
statement,  when  he  remarked,  that,  having  oace  joined  the  robbers,  "  he  had 
been  with  them  ever  since." 


A   CHAl'TKR    OF    ERIE.  67 

one  hundred  and  thirty-eight  per  cent  in  eight  months.  Such 
a  process  of  inflation  may,  perhaps,  be  justly  considered  the 
most  extraordinary  feat  of  financial  legerdemain  which  history 
has  yet  recorded. 

Now,  however,  when  the  committee  of  the  Stock  Exchange 
liad  returned  to  those  who  sent  them,  the  mask  was  thrown 
off,  and  operations  were  conducted  with  vigor  and  determina- 
tion. New  issues  of  P>ie  were  continually  forced  upon  the 
market  imtil  the-stock  fell  to  35  ;  greenbacks  were  locked  up 
in  the  vaults  of  the  banks,  until  the  unexampled  sum  of 
twelve  millions  was  withdrawn  from  circulation ;  the  prices 
of  securities  and  merchandise  declined ;  trade  and  the  au- 
tumnal movement  of  the  crops  were  brought  almost  to  a 
stand-still ;  and  loans  became  more  and  more  difficidt  to  nego- 
tiate, until  at  length  even  one  and  a  half  per  cent  a  day  was 
paid  for  carrying  stocks.  Behind  all  this  it  was  notorious  that 
some  one  wiis  pulling  the  wires,  the  slightest  touch  upon 
which  sent  a  quiver  through  every  nerve  of  the  great  financial 
organism,  and  wrung  private  gain  from  public  agony.  The 
strange  proceeding  reiriinds  one  of  those  scenes  in  the  cham- 
bers of  the  Inquisition  where  the  judges  calmly  put  their 
victim  to  the  question,  until  his  spasms  warned  them  not  to 
exceed  the  limits  of  human  endurance.  At  last  the  public 
distress  reached  the  ears  of  the  government  at  Washington. 
While  it  was  simply  the  gamblers  of  Wall  Street  who  were 
tearing  each  other,  their  clamor  for  relief  excited  little  sym- 
pathy. When,  however,  the  suflfering  had  extended  through 
all  the  legitimate  business  circles  of  the  country,  —  when  the 
scarcity  of  money  threatened  to  cut  off  the  winter  food  of  the 
poor,  to  rob  the  farmer  of  the  fruits  of  his  toil,  and  to  bring 
ruin  upon  half  the  debtor  class  of  the  community,  —  then 
even  Mr.  McCulloch,  pledged  as  he  was  to  contraction,  was 
moved  to  interfere.  The  very  revenues  of  the  government 
were  affected  by  the  operations  of  gamblers.  They  were 
therefore  informed  that,  if  necessary,  fifty  millions  of  addi- 
tional currency  would  be  forthcoming  to  the  relief  of  the 
community,  and  then,  and  not  till  then,  the  screws  were 
loosened. 


G8  A   CHAPTER   OF   ERIE. 

The  harvest  of  the  speciila.tors,  however,  was  still  but  half 
gathered.  Hitherto  the  combination  had  operated  for  a  foil. 
Now  was  the  moment  to  change  the  tactics  and  take  advan- 
tage of  the  rise.  The  time  was  calculated  to  a  nicety.  The 
London  infatuation  had  wonderfully  continued,  and  as  fast  as 
certificates  of  stock  were  issued  they  seemed  to  take  wings 
across  the  Atlantic.  Yet  there  was  a  limit  even  to  English 
credulity,  and  in  November  it  became  evident  that  the  agents 
of  foreign  houses  were  selling  their  stock  to  arrive.  The 
price  was  about  40 ;  the  certificates  might  be  expected  by  the 
steamer  of  the  23d.  Instantly  the  combination  changed 
front.  As  before  they  had  depressed  the  market,  they  now 
ran  it  up,  and,  almost  as  if  by  magic,  the  stock,  which  had 
been  heavy  at  40,  astonished  every  one  by  shooting  up  to  50. 
New  developments  were  evidently  at  hand. 

At  this  point  Mr.  Daniel  Drew  once  more  made  his  appear- 
ance on  the  stage.  As  was  very  natural,  he  had  soon  w-earied 
of  the  sameness  of  his  part  as  a  mere  looker-on  in  Wall  Street, 
and  had  relajjsed  into  his  old  habits.  He  was  no  longer 
treasui'er  of  the  Erie,  and  could  not  therefore  invite  the  pub- 
lic to  the  game,  while  he  himself  with  sombre  piety  shook  tin 
loaded  dice.  But  it  had  become  with  him  a  second  nature  to 
operate  in  Erie,  and  once  more  he  was  deep  in  its  movements. 
At  first  he  had  combined  with  his  old  friends,  the  present 
directors,  in  their  "  locking-up  "  conspiracy.  He  had  agreed 
to  a.ssist  them  to  the  extent  of  four  millions.  The  vacillating, 
timitl  nature  of  the  man,  however,  could  not  keep  pace  with 
his  more  daring  and  determined  associates,  and,  after  embark- 
ing a  million,  becoming  alarmed  at  the  success  of  the  joint 
operations  and  the  remonstrancos  of  those  who  were  threat- 
ened with  ruin,  he  withdrew  his  funds  from  tlie  operators' 
control  and  himself  from  their  councils.  But  though  he  did 
not  care  to  run  the  risk  or  to  incur  the  odium,  ho  had  no  sort 
of  objection  to  sharing  the 'spoils.  Knowing,  therefore,  or 
snpjwsing  that  he  knew,  the  plan  of  campaign,  and  that  plan 
jumping  with  his  own  bearish  inclinations,  he  continued,  on 
his  own  fvccount,  operations  looking  to  a  fall.     One  may  easily 


A   CHAPTER   OF    ERIK.  69 

conceive  the  wmth  of  the  Erie  operators  at  such  a  treacherous 
policy  \  and  it  is  not  difficult  to  imagine  their  vows  of  ven- 
geance. Meanwhile  all  went  well  with  Daniel  Drew.  Erie 
looked  worse  and  worse,  and  the  golden  harvest  seemed  draw- 
ing near.  By  the  middle  of  November  he  had  contracted  for 
the  delivery  of  some  seventy  thousand  shares  at  current  prices, 
averaging,  perhaps,  38,  and  probably  was  coimting  his  gains. 
He  did  not  appreciate  the  fidl  power  and  resources  of  his  old 
associates.  On  the  14th  of  November  their  tactics  changed, 
and  he  found  himself  involved  in  terrible  entanglements,  — 
hopelessly  cornered.  His  position  disclosed  itself  on  Satur- 
day. Naturally  the  first  impulse  was  to  have  recourse  to 
the  courts.  An  injunction — a  dozen  injunctions — could 
be  had  for  the  asking,  but,  unfortunately,  could  be  had  by 
both  parties.  Drew's  own  recent  experience,  and  his  intimate 
acquaintance  with  the  characters  of  Fisk  and  Gould,  were  not 
calculated  to  inspire  him  with  much  confidence  in  the  efficacy 
of  the  law.  But  nothing  else  remained,  and,  after  hurried 
consultations  among  the  victims,  the  lawyers  were  applied  to, 
the  affidavits  were  prepared,  and  it  was  decided  to  repair  on 
the  following  Monday  to  the  so-called  courts  of  justice. 

Nature,  however,  had  not  bestowed  on  Daniel  Drew  the 
steady  nerve  and  sturdy  gambler's  pride  of  either  Vanderbilt 
or  of  his  old  companions  at  Jersey  City.  His  mind  wavered 
and  hesitated  between  different  courses  of  action.  His  only 
care  was  for  himself,  his  only  thought  was  of  his  own  position. 
He  was  willing  to  betray  one  party  or  the  other,  as  the  case 
might  be.  He  had  given  his  affidavit  to  those  who  Avere  to 
bring  the  suit  on  the  Monday,  but  he  stood  perfectly  ready  to 
employ  Sunday  in  betraying  their  counsels  to  the  defendants  in 
the  suit,  A  position  more  contemptible,  a  state  of  mind  more 
pitiable,  can  hardly  be  conceived.  After  passing  the  night  in 
this  abject  condition,  on  the  morning  of  Sunday  he  sought  out 
Mr.  Fisk  for  purposes  of  self-humiliation  and  treachery.*    He 

*  It  ought  perhaps  to  be  stated  that  this  portion  of  the  narrative  has  ro 
stronger  foundation  than  an  affidavit  of  Mr.  Fisk,  which  has  cot,  however, 
been  publicly  contradicted. 


70  A   CHAl'TKK   OF  ERIE. 

then  partially  revealed  the  difficulties  of  his  situation,  only  to 
have  his  confidant  prove  to  him  how  entirely  he  was  caught, 
by  completing  to  him  the  revelation.  He  betrayed  the  secrets 
of  his  new  allies,  and  bemoaned  his  own  hard  fate  ;  he  was 
thereupon  comforted  by  Mr.  Fisk  with  the  cheery  remark 
that  "he  (Drew)  was  the  last  man  who  ought  to  whine  over 
any  position  in  which  he  placed  himself  in  regard  to  Erie." 
The  poor  man  begged  to  see  Mr.  Gould,  and  would  take  no 
denial.  Finally  Mr.  Gould  was  brought  in,  and  the  scene  was 
repeated  for  his  edification.  The  two  must  have  been  satiated 
with  I'cvenge.  At  last  they  sent  him  away,  promising  to  see 
him  again  that  evening.  At  the  hour  named  he  again  ap- 
peared, and,  after  waiting  their  convenience,  —  for  they 
spared  him  no  humiliation,  —  he  again  appealed  to  them, 
offering  them  great  sums  if  they  would  issue  new  stock  or 
lend  him  of  their  stock.  He  implored,  he  argued,  he  threat- 
ened. At  the  end  of  two  hours  of  humiliation,  persuaded 
that  it  was  all  in  vain,  that  he  was  wholly  in  the  power  of  an- 
tagonists without  mercy,  he  took  his  hat,  said,  "  I  will  bid  you 
good  night,"  and  went  his  way. 

There  is  a  touch  of  nature  about  this  scene  which  reads  like 
fiction.  Indeed,  it  irresistibly  recalls  the  feebler  eftbrt  of 
Dickens  to  portray  Fagin's  last  night  alive,  and  there  is  more 
pathos  in  the  parting  address  than  in  the  Jew's,  —  "  An  old 
man,  my  lord !  a  very,  very  old  man."  But  the  truth  is 
stranger  than  fiction,  Dickens  did  not  dare  picture  the  old 
"  fence "  in  Oliver  Twist  turned  out  of  his  own  house  and 
stripped  of  his  plunder  by  the  very  hands  through  which  ho 
had  procured  it.  lu  the  case  of  Daniel  Drew,  however,  the 
ideal  poetic  justice  was  brought  about  in  fact ;  the  evil  instruc- 
tions returned  to  plague  the  inventor,  and  it  is  hard  to  believe 
that,  as  he  left  the  Erie  offices  that  night,  his  apt  pupils,  even 
as  those  of  Fagin  might  have  done,  did  not  watch  his  retiring 
steps  with  suppressed  merriment  ;  and,  when  the  door  had 
closed  n])on  him,  that  the  one  did  not  explode  in  loud  bursts 
of  laughter,  while  the  otlier,  with  a  quiet  chuckle,  plunged 
his  hands  into  those  capacious  pockets  which  yawned  for  all 


A   CHAPTER   OF   ERIE.  71 

the  wealth  of  Erie.  Bad  as  all  these  things  ai'e,  terrible  as  is 
the  condition  of  aifairs  only  partially  revealed,  there  is  a  grim 
humor  running  through  them  which  ever  makes  itself  felt. 

But  to  return  to  the  course  of  events.  With  the  lords  of 
Erie  forewarned  was  forearmed.  They  knew  something  of  the 
method  of  procedure  in  New  York  courts  of  law.  At  this- 
particular  juncture  Mr.  Justice  Sutherland,  a  magistrate 
of  such  pure  character  and  unsullied  reputation  that  it  is 
inexplicable  how  he  ever  came  to  be' elevated  to  the  bench  on 
which  he  sits,  was  hoicking  chambers,  according  to  assignment, 
for  the  four  weeks  between  the  first  Monday  in  November  and 
the  first  Monday  in  December.  By  a  rule  of  the  court,  all 
applications  for  orders  during  that  time  were  to  be  made 
before  him,  and  he  onlj^,  according  to  the  courtesy  of  the 
Bench,  took  cognizance  of  such  proceedings.  Some  general 
arrangement  of  this  nature  is  manifestly  necessary  to  avoid 
continual  conflicts  of  jurisdiction.  The  details  of  the  assault 
on  the  Erie  directors  having  been  settled,  counsel  appeared 
before  Judge  Sutherland  on  Monday  morning,  and  petitioned 
for  an  injunction  restraining  the  Erie  directors  from  any  new 
issue  of  stock  or  the  removal  of  the  funds  of  the  company 
beyond  the  jurisdiction  of  the  court,  and  also  asking  that  the 
road  be  placed  jn  the  hands  of  a  receiver.  The  suit  was 
brought  in  the  name  of  Mr.  August  Belmont,  who  was  sup- 
posed to  represent  large  foreign  holders.  The  petition  set 
forth  at  length  the  alleged  facts  in  the  case,  and  was  sup- 
ported by  the  affidavits  of  Mr.  Drew  and  others.  Mr.  Drew 
apparently  did  not  inform  the  counsel  of  the  manner  in  which 
he  h.ad  passed  his  leisure  hours  on  the  previous  day  ;  had  ho 
done  so,  Mr.  Belmont's  counsel  probably  would  have  expedited 
their  movements.  The  injunction  was,  however,  duly  signed, 
and,  doubtless,  immediately  served. 

Meanwhile  Messrs.  Gould  and  Fisk  had  not  been  idle.  Ap- 
plications for  injunctions  and  receiverships  were  a  game  which 
two  could  play  at,  and  long  experience  had  taught  these  close 
observers  the  very  great  value  of  the  initiative  in  law.  Accord- 
ingly, some  two  hours  before  the  Belmont  application  was 


72  A   CHAPTER   OF   ERIE. 

made,  they  had  sought  no  less  a  person  than  Mr.  Justice  Bar- 
nard, caught  him,  as  it  were,  either  in  his  bed  or  at  his  break- 
fast, whereupon  he  had  held  a  lit  de  justice,  and  made  divers 
sistonishing  orders.  A  petition  was  presented  in  the  name 
of  one  Mcintosh,  a  sabiried  officer  of  the  Erie  Road,  who 
claimed  also  to  be  a  shareholder.  It  set  forth  the  danger 
of  injvuictions  and  of  the  appointment  of  a  receiver,  the  great 
injury  likely  to  result  therefrom,  etc.  After  due  consideration 
on  the  part  of  Judge  Barnard,  an  injunction  was  issued,  stay- 
ing and  restraining  all  suits,  and  actually  appointing  Jay 
Gould  receiver,  to  hold  and  disburse  the  funds  of  the  company 
in  accordance  with  the  resolutions  of  the  Board  of  Directors 
and  the  Executive  Committee.  This  certainly  was  a  very 
brilliant  flank  movement,  and  testified  not  less  emphatically 
to  Gould's  genius  than  to  Barnard's  law ;  but  most  of  all  did 
it  testify  to  the  efficacy  of  the  new  combination  between 
Tammany  Hall  and  the  Erie  Railway.  Since  the  passage 
of  the  bill  "to  legalize  coimterfeit  money,"  in  April,  and 
the  present  November,  new  light  had  burst  upon  the  judicial 
mind,  and  as  the  news  of  one  injunction  and  a  vague  rumor 
of  the  other  crept  through  Wall  Street  that  day,  it  was  no 
wonder  that  operators  stood  aghast  and  that  Erie  fluctuated 
wildly  from  50  to  61  and  back  to  48. 

The  Erie  directors,  however,  did  not  rest  satisfied  with  the 
position  which  they  had  won  through  Judge  Barnard's  order. 
That  simply  placed  them,  as  it  were,  in  a  strong  defensive 
attitude.  They  were  not  the  men  to  stop  there  :  they  aspired 
to  nothing  less  than  a  vigorous  offensive.  With  a  superb  au- 
dacity, which  excites  admiration,  the  new  trustee  immediately 
filed  a  supplementary  petition.  Therein  it  was  duly  set  forth 
that  doubts  had  l)cen  raised  as  to  the  legality  of  the  recent  issue 
of  some  two  hundred  thousand  shares  of  stock,  and  that  only 
about  this  amount  was  to  be  had  in  America  ;  the  trustee  there- 
fore petitioned  for  authority  to  use  the  funds  of  the  corporation 
to  purchase  and  cancel  the  whole  of  this  amount  at  any  price 
less  than  the  par  value,  without  regard  to  the  rate  at  which  it 
had  been  issued.     The  desired  authority  was  conferred  by  Mr. 


A   CHAPTER    OF   ERIE.  73 

Justice  Baniard  as  soon  as  asked.  Human  assurance  could  go 
no  further.  The  petitioners  had  issued  these  shares  in  the 
hear  interest  at  40,  and  had  run  down  the  value  of  Erie  to 
35  ;  they  had  then  turned  round,  and  were  now  empowered 
to  buy  back  that  very  stock  in  the  bull  interest,  and  in  the 
name  and  with  the  funds  of  the  corporation,  at  par.  A  law 
of  the  State  distinctly  forbade  corporations  from  operating  in 
their  own  stock  ;  but  this  law  was  disregarded  as  if  it  had 
been  only  an  injunction.  An  injunction  forbade  the  treasurer 
from  making  any  disposition  of  the  funds  of  the  company,  and 
this  injunction  was  respected  no  more  than  the  law.  These 
trustees  had  sold  the  property  of  their  wards  at  40 ;  they 
were  now  prepared  to  use  the  money  of  their  wards  to  buy 
the  same  property  back  at  80,  and  a  judge  had  been  found 
ready  to  confer  on  them  the  power  to  do  so.  Drew  could  not 
withstand  such  tactics,  and  indeed  the  annals  of  Wall  Street 
furnished  no  precedent  or  parallel.  They  might  have  fur- 
nished one,  but  the  opportunity  had  been  lost.  Had  Robert 
Schuyler  not  lived  fifteen  years  too  soon,  —  had  he,  instead 
of  flying  his  country  and  dying  broken-hearted  in  exile,  boldly 
attempted  a  change  of  front  when  his  fraudulent  issues  had 
filled  Wall  Street  with  panic,  and  had  he  sought  to  use  the 
funds  of  his  company  for  a  masterly  upward  movement  in  his 
own  manufactured  stock,  —  then,  though  in  those  uncultivated 
and  illiberal  days  his  scheme  might  have  come  to  naught,  and 
he  himself  might  even  have  passed  from  the  presence  of  an 
indignant  jury  into  the  keeping  of  a  surly  jailer,  at  least  he 
would  have  evinced  a  mind  in  advance  of  his  day,  and  could 
have  comforted  himself  with  the  assurance  that  he  was  the 
first  of  a  line  of  great  men,  and  that  the  time  was  not  far 
distant  when  his  name  and  his  fame  would  be  cherished 
among  the  most  brilliant  recollections  of  Wall  Street.  But 
Schuyler  lived  before  his  time  ! 

When  this  last,  undreamed-of  act  was  made  public  on 
Wednesday  at  noon,  it  was  apparent  that  the  crisis  was  not  far 
oif.  Daniel  Drew  was  cornered.  Erie  Avas  scarce  and  selling 
at  47,  and  would  not  become  plenty  until  the  arrival  of  the  Eng- 

4 


74  A  chapt?:r  of  erie. 

lish  steamer  on  Monday;  and  so,  at  47,  Mr.  Drew  flung  him- 
self into  the  breach  to  save  his  endangered  credit,  and,  under 
his  purchases,  the*  stock  rapidly  rose,  until  at  five  o'clock 
Wednesday  afternoon  it  reached  57.  Contrary  to  expectation, 
the  "  corner  "  had  not  yet  culminated.  It  became  evident  the 
next  morning  that  before  two  o'clock  that  day  the  issue  would 
be  decided.  Drew  fought  desperately.  The  Brokers'  Board 
was  wild  with  excitement.  High  words  passed ;  collisions 
took  place  ;  the  bears  were  savage,  and  the  bulls  pitiless. 
Erie  touched  62,  and  there  was  a  difference  of  sixteen  per 
cent  between  cash  stock  and  stock  sold  to  be  delivered  in 
three  days,  —  when  the  steamer  would  be  in,  —  and  a  dif- 
ference of  ten  per  cent  between  stock  to  be  delivered  on 
the  spot  and  that  to  be  delivered  at  the  usual  time,  which 
was  a  quarter  after  two  o'clock.  Millions  were  handled  like 
thousands ;  fabulous  rates  of  interest  were  paid ;  rumors  of 
legal  proceedings  were  flying  about,  and  forays  of  the  Erie 
chiefs  on  the  Vanderbilt  roads  were  confidently  predicted. 
New  York  Central  suddenly  shot  up  seven  per  cent  under 
these  influences,  and  Vanderbilt  seemed  about  to  enter  the 
field.  The  interest  of  the  stock  market  centred  in  the  com- 
batants and  on  these  two  great  corporations.  All  other  stocks 
were  (luiet  and  neglected  while  the  giants  were  fighting  it 
out.  The  battle  was  too  fierce  to  last  long.  At  a  quarter 
before  three  o'clock  the  struggle  would  be  over.  Yet  now,  at 
the  very  last  moment,  the  prize  which  trembled  before  them 
eluded  the  grasp  of  the  Eric  ring.  Their  opponent  was  not 
saved,  but  they  shared  his  disaster.  Their  combination  had 
turned  on  the  fact,  disclosed  to  them  by  the  Erie  books,  that 
some  three  hundred  thousand  shares  of  its  stock  had  been 
issued  in  the  ten-share  certificates  which  alone  are  transmitted 
to  Loudon.  This  amount  they  supposed  to  be  out  of  the 
country  ;  the  balance  they  could  account  for  as  beyond  the 
reach  of  Drew.  Suddenly,  as  two  o'clock  a])proached,  and 
Erie  was  trembliug  in  the  sixties,  all  Broadway  —  every  tailor 
and  boot-maker  and  cigar-vender  of  Now  York  —  seemed  pour- 
ing into  Broad  Street,  and  each  new-comer  held  eagerly  before 


A  CHAPTER   OF   ERIE.  75 

him  one  or  more  of  those  ten-share  certificates  which  shoiild 
have  been  in  London.  Not  only  this,  bnt  the  pockets  of  the 
agents  of  foreign  banlcers  seemed  bnrsting  with  them.  Bed- 
lam had  snddenly  broken  loose  in  Wall  Street.  It  was  abso- 
Intely  necessary  for  the  conspirators  to  absorb  this  stock,  to 
keep  it  from  the  hands  of  Drew.  This  they  attempted  to  do, 
and  manfnlly  stood  their  gronnd,  fighting  against  time.  Sud- 
denly, when  the  hour  had  almost  come,  —  when  five  minutes 
more  would  have  landed  them  in  safety,  —  through  one  of 
those  strange  incidents  which  occur  in  Wall  Stree>  and  which 
cannot  be  explained,  they  seemed  smitten  with  panic.  •  It  is 
said  their  bank  refused  to  certify  their  checks  for  the  suddenly 
increased  amount ;  the  sellers  insisted  on  having  certified 
checks,  and,  in  the  delay  caused  by  this  unforeseen  difficulty, 
the  precious  five  minutes  elapsed,  and  the  crisis  had  passed. 
The  fruits  of  their  plot  had  escaped  them.  Drew  made  good 
his  contracts  at  57,  the  stock  at  once  fell  heavily  to  42,  and  a 
dull  quiet  succeeded  to  the  excitement  of  the  morning.  The 
hand  of  the  government  had  made  itself  felt  in  Wall  Street. 

The  Broad  Street  conflict  was  over,  and  some  one  had 
reaped  a  harvest.  W^ho  was  it  ]  It  was  not  Drew,  for  his 
losses,  apart  from  a  ruined  prestige,  were  estimated  at  nearly 
a  million  and  a  half  of  dollars.  The  Erie  directors  were  not  the 
fortunate  men,  for  their  only  trophies  were  great  piles  of  certifi- 
cates of  Erie  stock,  which  had  cost  them  "corner"  prices,  and  for 
which  no  demand  existed.  If  Drew's  loss  was  a  million  and 
a  half,  their  loss  was  likely  to  be  nearer  three  millions.  Who, 
then,  were  the  recipients  of  these  missing  millions  1  There  is 
an  ancient  saying,  which  seems  to  have  been  tolerably  verified 
in  this  case,  that  when  certain  persons  fall  out  certain  other 
persons  come  by  their  dues.  The  "  corner  "  was  very  beaivti- 
ful  in  all  its  details,  and  most  admirably  planned ;  but,  unfor- 
tunately, those  who  engiueered  it  had  just  i:)reviously  made 
the  volume  of  stock  too  large  for  accurate  calculation.  For 
once  the  outside  public  had  been  at  hand  and  Wall  Street  had 
been  foinid  wanting.  A  large  portion  of  the  vast  sum  taken 
from  the  combatants  foiuid  its  way  into  the  pockets  of  the 


76  A   CHAPTER   OF   ERIE. 

agents  of  English  bankers,  and  a  part  of  it  was  accounted  for 
by  them  to  their  principals  ;  another  portion  went  to  relieve 
anxious  holders  among  the  American  outside  public ;  the  re- 
mainder fell  to  professional  operators,  pi'obably  far  more  lucky 
than  sagacious.  Still,  there  had  been  a  fall  before  there  was 
a  rise.  The  subsequent  disaster,  perhaps,  no  more  than  coun- 
terbalanced the  earlier  victory  ;  at  any  rate,  Messrs.  Gould 
and  Fisk  did  not  succumb,  but  preserved  a  steady  front,  and 
Erie  was  more  upon  the  sti'eet  than  ever.  In  fact,  it  was 
wholly  there  now.  The  recent  operations  had  proved  too 
oiiti'ageous  even  for  the  Brokers'  Board.  A  new  rule  was 
passed,  that  no  stock  should  be  called,  the  issues  of  which 
were  not  registered  at  some  respectable  banking-house.  The 
Erie  directors  declined  to  conform  to  this  rule,  and  their  road 
was  stricken  from  the  list  of  calls.  Nothing  daunted  at  this, 
these  Protean  creatures  at  once  organized  a  new  board  of 
their  own,  and  so  far  succeeded  in  their  efforts  as  to  have 
Erie  quoted  and  bought  and  sold  as  regularly  as  ever. 

Though  the  catastrophe  had  taken  j)lace  on  the  19th,  the 
struggle  was  not  yet  over.  The  interests  involved  were  so 
enormous,  the  developments  so  astounding,  such  passions  had 
been  aroused,  that  some  safety-valve  through  which  suppressed 
wrath  could  work  itself  oft"  was  absolutely  necessary,  and  this 
the  courts  of  law  afforded.  The  attack  was  stinudated  by 
various  motives.  The  bona  Jide  holders  of  the  stock,  espe- 
cially the  foreign  hoklers,  were  alarmed  for  the  existence  of 
their  ])roperty.  The  Eric  ring  had  now  l^oldly  taken  the  position 
that  their  duty  was,  not  to  manage  the  road  in  the  interests 
of  its  owners,  not  to  make  it  a  dividend-paying  corp{)ration, 
but  to  preserve  it  from  consolidation  witli  the  Vanderbilt 
monopoly.  This  policy  was  openly  proclaimed  by  Mr.  (iould, 
at  a  later  day,  before  an  investigating  conmiittee  at  Albany. 
With  un8i)cakable  effrontery,  —  an  effrontery  so  great  as  ac- 
tually to  impose  on  his  audience  and  a  portion  of  tlje  press, 
and  make  them  believe  that  the  })ublic  ought  to  wish  him 
success,  —  he  described  how  stock  issues  at  the  proper  time, 
to  any  required  amount,  could  alone  keep  him  in  control  of 


A   CHAPTER   OF   ERIE.  77 

the  road,  and  keep  Mr.  Vanderbilt  out  of  it ;  it  would  be  his 
duty,  therefore,  he  argued,  to  issue  as  much  new  stock,  at 
al)Out  the  time  of  the  annual  election,  as  would  suffice  to  keep 
a  majority  of  all  the  stock  in  existence  luider  his  control  ;  and 
he  declared  that  he  meant  to  do  this.*  The  strangest  thing 
of  all  was,  that  it  never  seemed  to  occiu'  to  his  audience  that 
the  propounder  of  this  comical  sophistry  was  a  trustee  and 
guardian  for  the  stockholders,  and  not  a  public  benefactor ; 
and  that  the  owners  of  the  Erie  Road  might  possibly  j)refer 
not  to  be  deprived  of  their  property,  in  order  to  secure  the 
blessing  of  competition.  So  unique  a  method  of  securing  a 
re-election  was  probably  never  before  suggested  with  a  grave 
fixce,  and  yet,  if  wo  may  believe  the  reporters,  Mr.  Gould,  in 
developing  it,  produced  a  very  favorable  impression  on  the 
committee.  It  was  hardly  to  be  expected  that  such  advanced 
views  as  to  the  duties  and  powers  of  railway  directors  would 
fa\"orably  impress  commonplace  individuals  who  might  not 
care  to  have  their  property  scaled  down  to  meet  Mr.  Gould's 
views  of  public  welfare.  These  persons  accordingly,  popu- 
larly supposed  to  be  represented  by  Mr.  Belmont,  wished  to 
get  their  property  out  of  the  hands  of  such  fanatics  in  the 

*  Question  to  Mr.  Gould  For  the  information  of  tlie  committee,  would 
you  give  us  your  opinion  as  to  the  utility  of  that  section  of  the  general 
railroad  law,  under  which  so  many  issues  of  convertible  bonds  have  been 
made? 

Answer.  I  could  only  speak  as  to  the  Eric  Road;  that  law  saved  the  Erie 
Road  from  bankruptcy;  and  as  long  as  that  law  is  unrepealed,  I  should  do 
what  I  did  again.     I  should  save  the  road.     I  think  it  is  a  good  law. 

Q.  Is  it  not  liable  to  abuse? 

A.  I  have  never  known  it  to  bo  abused;  if  that  was  repealed.  I  think  that 
Mr.  Vanderbilt  would  have  the  road;  but  as  long  as  it  is  not  repealed  it  is  held 
in  terrorem  over  him. 

Q.  Suppose  the  section  was  amended  so  as  to  require  the  consent  of  the 
stockholders? 

A.  Suppose  he  owned  all  the  stock,  what  would  be  the  difference?  .... 

Q.  What  other  effect  would  it  (the  repeal  of  Section  10)  h.ive? 

A.  I  think  it  would  lay  the  State  open  to  a  great  monopoly,  —  the  greatest 
the  world  has  ever  seen. 

Much  more  followed  in  the  same  style.  One  remark  of  Mr.  Gould's,  liow- 
evei-,  in  this  examination,  bore  the  stamp  of  truth  and  perspicuity.  It  is  re- 
corded as  follows:  "  The  Erie  road  won't  be  a  dividend-paying  road  for  a  long 
time  on  its  common  stock." 


/8  A   CHAPTER   OF   ERIE. 

cause  of  cheap  transportation  and  plentiful  stock,  with  the 
least  possible  delay.  Combined  with  these  wex'e  the  operators 
who  had  suflFered  in  the  late  "  corner,"  and  who  desired  to  fight 
ft)r  better  tex'ms  and  a  more  equal  division  of  plunder.  Be- 
hind them  all,  Vanderbilt  was  supposed  to  be  keeping  an  eager 
eye  on  the  long-coveted  Erie.  Thus  the  materials  for  litiga- 
tion existed  in  abundance. 

On  Monday,  the  23d,  Judge  Sutherland  vacated  Judge 
Barnard's->  order  appointing  Jay  Gould  receiver,  and,  after 
seven  hours'  argument  and  some  exhibitions  of  vulgarity  and 
indecency  on  the  part  of  counsel,  which  vied  with  those  of 
the  previous  April,  he  appointed  Mr.  Davies,  an  ex-chief  jus- 
tice of  the  Court  of  Appeals,  receiver  of  the  road  and  its 
franchise,  leaving  the  special  terms  of  the  order  to  be  settled 
at  a  future  day.  The  seven  hours'  struggle  had  not  been 
without  an  object;  that  day  Judge  Barnard  had  been  pecu- 
liarly active.  The  morning  hours  he  had  beguiled  by  the 
deliveiy  to  the  grand  jury  of  one  of  the  most  astoimding 
charges  ever  recorded  ;  and  now,  as  the  shades  of  evening 
were  falling,  he  closed  the  labors  of  the  day  by  issuing  a  stay 
of  the  proceedings  then  pending  before  his  associate.*     Tnes- 

•  The  chnrge  referred  to  is  altogether  too  curious  to  be  forgotten ;  it  was 
couched  in  the  following  terms:  — 

"  Gentlemen  ok  the  Grand  Jury,  —  I  deem  it  not  inappropriate  at  the 
present  time  to  call  your  attention  to  three  or  four  subjects  that,  in  my  judg- 
ment, the  grand  jury  should  look  into:  First,  in  regard  to  alleged  frauds  at 
elections;  second,  in  regard  to  the  alleged  corruptions  of  the  judiciary  here; 
third,  as  to  the  action  of  certain  newspapers  in  New  York  in  perpetrating 
daily  and  hourly  libels.  I  had  intended,  gentlemen,  at  the  commencement  of 
this  term,  to  have  gone  over  many  of  these  subjects  more  fully  than  I  can 
now;  but  I  am  led  to-day  not  to  delay  it  any  longer  in  consequence  of  the 
annoyance  1  am  sni)jected  to  by  newspapers  and  letter-writers,  not  borne  out, 
of  ali  sorts  of  vilifications  and  abuses  for  offences  of  which  I  certainly  know 
nothing,  and  see  if  the  writers  of  some  of  these  articles  cannot  be  made  to 
come  before  you  and  substantiate  some  among  the  many  of  tlie  different  alle- 
gations that  they  have  made  against  the  judge  that  now  addresses  you.  In 
to-dny's  Tribune  and  to-day's  Timeo,  along  with  articles  in  the  .lersey  papers 
and  elsewhere,  are  charges  of  the  most  atrocious  character  made  against  cor- 
niptions,  in  interfering  with  the  duties  of  electors,  and  charging  the  judge 
with  being  in  a  combination  in  Wall  Street.  Now,  it  is  umiecessary  for  me  to 
say  to  yon  that  he  never  bought  or  sold  or  owned  a  share  of  stock  in  his  life, 
and  a«  for  the  brgc  fortune  of  $  5,000.000  which  one  of  the  papers  charges 


A   CHAPTER   OF   ERIE.  79 

day  had  been  named  by  Judge  Sutherland,  at  the  time  he 
appointed  liis  receiver,  as  the  day  upon  which  he  would  settle 
the  details  of  the  order.  His  first  proceeding  upon  that  day, 
on  finding  his  action  stayed  by  Judge  Barnard,  was  to  grant  a 
motion  to  show  cause,  on  the  next  day,  why  Barnard's  order 
should  not  be  vacated.  This  style  of  warfare,  however,  sa- 
vored altogether  too  much  of  the  tame  defensive  to  meet  suc- 
cessfully the  bold  strategy  of  Messrs.  Gould  and  Fisk.  They 
carried  the  war  into  Africa.  In  the  twenty-four  hours  during 
which  Judge  Sutherland's  order  to  show  cause  was  pending 
three   new  actions  were  commenced   by  them.     In  the  first 

him  with  being  possessed  of,  he  has  not  now,  nor  did  he  ever  hiive,  belonging 
to  him,  separate  from  liis  wife,  a  single  dollar's  worth  of  property,  and  is  to- 
day dependent  upon  his  salary  as  a  judge  and  the  charity  of  his  wife;  and 
why  these  particular  and  atrocious  charges  at  this  particular  time  should  be 
made  with  such  boldness  and  audacity  is  a  matter  I  hope  you  as  grand  jurors, 
whose  ducy  it  is,  will  look  into,  so  that  if  you  find  them  to  be  substantial,  or 
even  a  suspicion  that  they  are  true,  that  you  will  give  the  judge  a  chance  to 
resign.  For  infamy  means  one  thing,  and  it  ought  to  be  ferreted  out;  and  if  a 
man  or  a  newspaper  editor  will  sit  down  deliberately  and  make  a  charge 
without  any  proof,  let  us  see  whether  the  rigor  and  terror  of  the  law  will  not 
stop  this  thing  in  future.  For  eleven  years  this  judge  has  submitted  to  it 
without  any  notice,  and  now,  having  arrived  at  a  period  of  life  when  his  use- 
fulness is  impaired  by  such  charges,  he  deems  it  his  duty,  and  yours,  gentle- 
men, to  look  into  the  matter  whenever  you  have  leisure,  and  say  whether  a 
combination  of  thieves,  scoundrels,  and  rascals,  who  have  infested  Wall  Street 
and  Broad  Street  for  years,  and  are  now  quarrelling  among  themselves,  shall  be 
permitted  to  turn  around  and  endeavor  to  hide  their  own  tracks  by  abuse  and 
vilification  of  the  judge." 

It  may  be  interesting  to  record  how  this  fulmination  afiected  the  papers 
referred  to.  The  Times  the  next  morning  commented  on  it  as  follows:  "  What 
we  have  said  and  done  in  tlie  matter  we  have  said  and  done  deliberately; .... 
we  believe  we  have  said  nothing  that  is  not  true,  and  nothing  that  cannot  be 
proved  to  be  true.  At  all  events,  we  shall  very  willingly  accept  the  responsi- 
bility of  establishing  its  truth  and  of  vindicating  ourselves  from  the  judge's 
imputations  for  having  said  it.  A  few  days  later  it  was  reported  that  a  true 
bill  had  been  found  against  the  Times,  and  that  paper  on  the  26th  congratu- 
lated the  public  on  the  fact.  Finally,  when  Judge  Barnard  determined  to  drop 
the  matter,  the  Times,  in  its  issue  of  December  1,  discoursed  as  follows  on 
the  subject:  "We  beg  the  judge  to  understand  that  we  are  quite  ready  to 
meet  the  issue  that  he  tendered  us,  and  to  respond  to  such  an  indictment  as 
lie  first  urged  the  grand  jury  to  find  against  us,  or  to  a  suit  for  damages, 
which  would,  perhaps,  better  suit  the  deplorable  condition  of  pecuniary 
dependence  to  which  he  says  he  is  reduced." 

Nothing  further  came  of  the  matter. 


80  A   CHAPTER   OF   ERIE. 

place,  they  sued  the  suers.  Alleging  the  immense  injuiy 
likely  to  result  to  the  Erie  Road  from  actions  commenced,  as 
they  alleged,  solely  with  a  view  of  extorting  money  in  settle- 
ment, Mr.  Belmont  was  sued  for  a  million  of  dollars  in  dam- 
ages. Their  second  suit  was  against  Messrs.  Work,  Schell, 
and  others,  concerned  in  the  litigations  of  the  previous  spring, 
to  recover  the  $429,250  then  paid  them,  as  was  alleged,  in  a 
fraudulent  settlement.  These  actions  were,  however,  com- 
monplace, and  might  have  been  brought  by  ordinary  men, 
Messrs.  Gould  and  Fisk  were  always  displaying  the  invention 
of  genius.  The  same  day  they  carried  their  quarrels  into  the 
United  States  courts.  The  whole  press,  both  of  New  York 
and  of  the  country,  disgusted  with  the  parody  of  justice 
enacted  in  the  State  courts,  had  cried  aloud  to  have  the  whole 
matter  transfeiTcd  to  the  United  States  tribunals,  the  decis- 
ions of  which  might  have  some  weight,  and  where,  at  least, 
no  partisans  upon  the  bench  would  shower  each  other  with 
stays,  injunctions,  vacatings  of  orders,  and  other  such  pellets 
of  the  law.  The  Erie  ring,  as  usual,  took  time  by  the  fore- 
lock. While  their  slower  antagonists  were  deliberating,  they 
acted.  On  this  Monday,  the  23d,  one  Henry  B.  Whelpley, 
who  had  been  a  clerk  of  Gould's,  and  who  claimed  to  be  a 
stockholder  in  the  Erie  and  a  citizen  of  New  Jersey,  instituted 
a  suit  against  the  Erie  Railway  before  Judge  Blatchford,  of 
the  United  States  District  Court.  Alleging  the  doubts  which 
hung  over  the  validity  of  the  recently  issued  stock,  he  peti- 
tioned that  a  receiver  might  be  appointed,  and  the  company 
directed  to  transfer  into  his  hands  enough  property  to  secure 
from  loss  the  plaintiff  as  well  as  all  other  holdei-s  of  the  new 
issues.  The  Erie  counsel  were  on  the  ground,  and,  as  soon  as 
the  petition  was  read,  waived  all  further  notice  an  to  the  mat- 
ters contained  in  it ;  whereupon  the  court  at  once  appointed 
Jay  Gould  receiver,  and  directed  the  Erie  Company  to  place 
eight  millions  of  dollars  in  his  hands  to  protect  the  rights 
represented  by  the  plaintiff.  Of  course  the  receiver  was 
required  to  give  .bonds  with  sufficient  siireties.  Among  the 
sureties  was  James   Fisk,  Jr.     The   brilliancy  of  this  move 


A   CHAPTER   OF   ERIE.  81 

was  only  surj)a8sed  by  its  success.  It  fell  like  a  bombshell  in 
the  enemy's  camp,  and  scattered  dismay  among  those  who 
still  preserved  a  lingering  faith  in  the  virtue  of  law  as  admin- 
istered by  any  known  courts.  The  interference  of  the  court 
was  in  this  case  asked  for  on  the  ground  of  fraud.  If  any 
fraud  had  been  committed,  the  officers  of  the  company  alone 
could  be  the  delinquents.  To  guard  against  the  consecpiences 
of  that  fraud,  a  receivership  was  prayed  for,  and  the  court 
appointed  as  receiver  the  very  officer  in  whom  the  alleged 
frauds,  on  which  its  action  was  based,  must  have  originated. 
It  is  true,  as  was  afterwards  observed  by  Judge  Nelson  in  set- 
ting it  aside,  that  2l  prima  facie  case,  for  the  appointment  of  a 
receiver  "  was  supposed  to  have  been  made  out,"  that  no  ob- 
jection to  the  person  suggested  was  made,  and  that  the  right 
was  expressly  reserved  to  other  parties  to  come  into  court, 
with  any  allegations  they  saw  fit  against  Receiver  Gould. 
The  collusion  in  the  case  was,  nevertheless,  so  evident,  the 
facts  were  so  notorious  and  so  apparent  from  the  very  papers 
before  the  court,  and  the  character  of  Judge  Blatchford  is  so 
far  above  suspicion,  that  it  is  hard  to  believe  that  this  order 
was  not  procured  from  him  by  surprise,  or  through  the  agency 
of  some  counsel  in  whom  he  reposed  a  misplaced  confidence. 
The  Erie  ring,  at  least,  had  no  occasion  to  be  dissatisfied  with 
this  day's  proceedings. 

The  next  day  Judge  Sutherland  made  short  work  of  his 
brother  Barnard's  stay  of  proceedings  in  regard  to  the  Davies 
receivership.  He  vacated  it  at  once,  and  incontinently  pro- 
ceeded, wholly  ignoring  the  action  of  Judge  Blatchford  on  the 
day  before,  to  settle  the  terms  of  the  order,  which,  covering 
as  it  did  the  whole  of  the  Erie  property  and  franchise,  ex- 
ccj)ting  only  the  operating  of  the  road,  bade  fair  to  lead  to  a 
conflict  of  jurisdiction  between  the  State  and  Federal  courts. 

And  now  a  new  judicial  combatant  appears  in  the  arena. 
It  is  difficvdt  to  say  why  Judge  Barnard,  at  this  time,  disap- 
pears from  the  nairative.  Perhaps  the  notorious  judicial 
violence  of  the  man,  which  must  have  made  his  eagerness  .as 
dangerous  to  the  cause  he  espoused  as  the  eagerness  of  a  too 

4*  F 


82  A   CHAPTER    OF   ERIE. 

swift  witness,  had  alarmed  the  Erie  counsel.  Perhaps  the 
fact  that  Judge  Sutherland's  term  in  chambers  would  expire 
in  a  few  days  had  made  them  wish  to  intrust  their  cause  to 
the  magistrate  who  was  to  succeed  him.  At  any  rate,  the 
new  order  staying  proceedings  under  Judge  Sutherland's  order 
was  obtained  from  Judge  Cardozo,  —  it  is  said,  somewhat 
before  the  terms  of  the  receivei-ship  had  been  finally  settled. 
The  change  spoke  well  for  the  discrimination  of  those  who 
made  it,  for  Judge  Cardozo  is  a  very  different  man  from  Judge 
Barnard.  Courteous  but  inflexible,  subtle,  clear-headed,  and 
unscrupulous,  this  magistrate  conceals  the  iron  hand  beneath 
the  silken  glove.  Equally  versed  in  the  laws  of  New  York  and 
in  the  mysteries  of  Tammany,  he  had  earned  his  place  by  a 
partisan  decision  on  the  excise  law,  and  was  nominated  for  the 
bench  by  Mr.  Fernando  Wood,  in  a  few  remarks  concluding  as 
follows :  "  Judges  were  often  called  on  to  decide  on  political 
qtiestions,  and  he  was  sorry  to  say  the  majority  of  them  de- 
cided according  to  their  political  bias.  It  was  therefore 
absolutely  necessary  to  look  to  their  candidate's  political  prin- 
ciples. He  would  nominate,  as  a  fit  man  for  the  office  of  Judge 
of  the  Supreme  Coiu't,  Albert  Cardozo."  Nominated  as  a 
partisan,  a  partisan  Cardozo  has  alwa3's  been,  when  the  occa- 
sion demanded.  Such  was  the  new  and  far  more  formidable 
champion  who  now  confronted  Sutherland,  in  place  of  the 
vidgar  Barnard.  His  first  order  in  the  matter  —  to  show 
cause  why  the  order  of  his  brother  judge  should  not  be  set 
aside  —  was  not  returnable  imtil  the  30th,  and  in  the  inter- 
vening five  days  many  events  were  to  happen. 

Immediately  after  the  settlement  by  Judge  Sutherland  of 
the  order  appointing  Judge  Davies  receiver,  that  gentleman 
had  proceeded  to  take  possession  of  his  trust.  Upon  arriving 
at  the  Erie  building,  he  found  it  converted  into  a  fortress,  with 
a  sentry  patrolling  behind  the  bolts  and  bars,  to  whom  was 
confided  the  duty  of  scrutinizing  all  comers,  and  of  admitting 
none  but  the  faithful  allies  of  the  garrison.  It  so  happened 
that  Mr.  Davies,  himself  unknown  to  the  custodian,  was  ac- 
companied by  Mr.  Eaton,  the  former  attorney  of  the  Erie 


A   CHAPTER   OF   ERIE.  83 

corporation.  This  gentleman  was  recognized  by  the  sentry, 
and  forthwith  the  gates  flew  open  for  himself  and  his  com- 
panion. In  a  few  moments  more  the  new  receiver  astonished 
Messrs.  Gould  and  Fisk,  and  certain  legal  gentlemen  with 
whom  they  happened  to  be  in  conference,  by  suddenly  appear- 
ing in  the  midst  of  them.  The  apparition  was  not  agreeable. 
Mr.  Fisk,  however,  with  a  fair  appearance  of  cordiality,  wel- 
comed the  strangere,  and  shortly  after  left  the  room.  Speedily 
returning,  his  manner  underwent  a  change,  and  he  requested 
the  new-comers  to  go  the  way  they  came.  As  they  did  not 
comply  at  once,  he  opened  the  door,  and  directed  their  atten- 
tion to  some  dozen  men  of  forbidding  aspe.ct  who  stood  out- 
side, and  who,  he  intimated,  were  prepared  to  eject  them 
forcibly  if  they  sought  to  prolong  their  unwelcome  stay.  As 
an  indication  of  the  lengths  to  which  Mr.  Fisk  was  prepared 
to  go,  this  was  sufficiently  significant.  The  movement,  how- 
ever, was  a  little  too  rapid  for  his  companions ;  the  lawyers 
protested,  Mr.  Gould  apologized,  Mr.  Fisk  cooled  down,  and 
his  familiars  retired.  The  receiver  then  proceeded  to  give 
written  notice  of  his  appointment,  and  the  fact  that  he  had 
taken  possession ;  disregarding,  in  so  doing,  an  order  of  Judge 
Cardozo,  staying  proceedings  under  Judge  Sutherland's  order, 
which  one  of  the  opposing  counsel  drew  from  his  pocket,  but 
which  Mr.  Davies  not  inaptly  characterized  as  a  "very  singu- 
lar order,"  seeing  that  it  was  signed  before  the  terms  of  the 
order  it  sought  to  affect  were  finally  settled.  At  length,  how- 
ever, at  the  earnest  request  of  some  of  the  subordinate  offi- 
cials, and  satisfied  with  the  formal  possession  he  had  taken, 
the  new  receiver  delayed  further  action  until  Friday.  He 
little  knew  the  resources  of  his  opponents,  if  he  vainly  sup- 
posed that  a  foiTnal  possession  signified  anything.  The  suc- 
ceeding Friday  found  the  directors  again  fortified  within,  and 
himself  a  much  enjoined  wanderer  without.  The  vigilant 
guards  were  now  no  longer  to  be  begixiled.  Within  the  build- 
ing, constant  discussions  and  considtations  were  taking  place  ; 
without,  relays  of  detectives  incessantly  watched  the  premises. 
No  rumor  was  too  wild  for  public  credence.     It  was  confi- 


84  A   CHAPTER   OF   ERIE. 

dently  stated  that  the  directors  were  about  to  fly  the  State 
and  the  country,  —  that  the  treasury  had  already  been  con- 
veyed to  Canada.  At  last,  late  on  Sunday  night,  Mr.  Fisk 
with  certain  of  his  associates  left  the  building,  and  made  for 
the  Jersey  Ferry  ;  but  on  the  way  he  was  stopped  by  a  vigilant 
lawyer,  and  many  papers  were  served  upon  him.  His  plans 
were  then  changed.  He  returned  to  the  office  of  the  company, 
and  presently  the  detectives  saw  a  carriage  leave  the  Erie 
portals,  and  heard  a  loud  voice  order  it  to  be  driven  to  the 
Fifth  Avenue  Hotel.  Instead  of  going  there,  however,  it 
drove  to  the  ferry,  and  presently  an  engine,  with  an  empty 
directors'  car  attached,  dashed  out  of  the  Erie  station  in  Jei*- 
sey  City,  and  disappeared  in  the  darkness.  The  detectives 
met  and  consulted ;  the  carriage  and  the  empty  car  were  put 
together,  and  the  inference,  announced  in  every  New  York 
paper  the  succeeding  day,  was  that  Messrs.  Fisk  and  Gould 
had  absconded  with  millions  of  money  to  Canada. 

That  such  a  ridiculous  story  should  have  been  published, 
much  less  believed,  simply  shows  how  utterly  demoralized  the 
public  mind  had  become,  and  how  prepared  for  any  act  of  high- 
handed fraxxd  or  outrage.  The  libel  did  not  long  remain  uncon- 
tradicted. The  next  day  a  card  from  Mr.  Fisk  was  telegi*aphed 
to  the  newspapers,  denying  the  calumny  in  indignant  terms. 
The  eternal  steel  rails  were  again  made  to  do  duty,  and  the 
midnight  flitting  became  a  harmless  visit  to  Binghamton  on 
business  connected  with  a  rolling-mill.  Judge  Balcom,  how- 
ever, of  injunction  memory  in  the  earlier  records  of  the  Erie 
suits,  resides  at  Binghamton,  and  a  leading  New  York  paper 
not  inaptly  made  the  timid  inquiry  of  Mr.  Fisk,  "  If  he  really 
thought  that  Judge  Balcom  was  running  a  rolling-mill  of  the 
Erie  Company,  what  did  he  think  of  Judge  Barnard]"  Mr. 
Fisk,  however,  as  became  him  in  his  character  of  the  Maecenas 
of  the  bar,  instituted  suits  claiming  damages  in  fabulous  sums, 
•for  defamation  of  character,  against  some  half-dozen  of  the 
leading  papers,  and  nothing  further  was  heard  of  the  matter, 
nor,  indeed,  of  the  suits  either.  Not  so  of  the  trip  to  Bing- 
hamton.    Ou  Tuesday,  the  Ist  of   December,  while  one  set 


A    CHAl'TER    OK    ERIE.  OO 

of  lawyers  were  arguing  an  appeal  in  tlio  Whelpley  case  before 
Judge  Nelson  in  the  Federal  courts,  and  another  set  were  pro- 
curing orders  from  Judge  Cardozo  staying  proceedings  author- 
ized by  Judge  Sutherland,  a  third  set  were  aiding  Judge 
Balcom  in  certain  new  proceedings  instituted  in  the  name  of 
the  Attorney-General  against  the  Erie  Road.  The  result 
arrived  at  was,  of  course,  that  Judge  Balcom  declared  his  to 
be  the  only  shop  where  a  regular,  reliable  article  in  the  way 
of  law  was  retailed,  and  then  proceeded  forthwith  to  restrain 
and  shut  up  the  opposition  establishments.  The  action  was 
brought  to  terminate  the  existence  of  the  defendant  as  a 
corporation,  and,  by  way  of  preliminary,  application  was  made 
for  an  injunction  and  the  appointment  of  a  receiver.  His 
Honor  held  that,  as  only  three  receivers  had  as  yet  been  ap- 
pointed, he  was  certainly  entitled  to  appoint  another.  It  was 
perfectly  clear  to  him  that  it  was  his  duty  to  enjoin  the  de- 
fendant corporation  from  delivering  the  possession  of  its  road, 
or  of  any  of  its  assets,  to  either  of  the  receivers  already  ap- 
pointed ;  it  was  equally  clear  that  the  corporation  would  be 
obliged  to  deliver  them  to  any  receiver  he  might  appoint. 
He  was  not  prepared  to  name  a  receiver  just  then,  however, 
though  he  intimated  that  he  should  not  hesitate  to  do  so  if 
necessary.  So  he  contented  himself  with  the  appointment 
of  a  referee  to  look  into  matters,  and,  generally,  enjoined  the 
directors  from  omitting  to  operate  the  road  themselves,  or 
from  delivering  the  possession  of  it  to  "  any  person  claiming 
to  be  a  receivei'." 

This  raiding  npon  the  agriciiltural  judges  was  not  peculiar 
to  the  Erie  party.  On  the  contrary,  in  this  proceeding  it 
rather  followed  than  set  an  example ;  for  a  day  or  two  pre- 
vious to  Mr.  Fisk's  hurried  journey,  Judge  Peckham  of  Albany 
had,  upon  papers  identical  with  those  in  the  Belmont  suit, 
issued  divers  orders,  similar  to  those  of  Judge  Balcom,  but  on 
the  other  side,  tying  up  the  Erie  directors  in  a  most  astonish- 
ing manner,  and  clearly  hinting  at  the  expediency  of  an  addi- 
tional receiver  to  be  appointed  at  Albany.  The  amazing  part 
of  these  Peckham  and  Balcom  proceedings  is,  that  they  seem 


80  A    CHAPTER    OF    ERIE. 

to  have  been  initiated  with  perfect  gravity,  and  neither  to  have 
been  looked  upon  as  jests,  nor  intended  by  their  originators  to 
bring  the  courts  and  the  laws  of  New  York  into  ridicule  and 
contempt.  Of  course  the  several  ordei's  in  these  cases  were 
of  no  more  importance  than  so  much  waste  paper,  unless, 
indeed,  some  very  cautious  counsel  may  have  considered  an 
extra  injunction  or  two  very  convenient  things  to  have  iu  his 
house ;  and  yet,  curiously  enough,  from  a  legal  point  of  view, 
those  in  Judge  Balcom's  court  seem  to  have  been  almost  the 
only  properly  and  regularly  initiated  proceedings  in  the  whole 
caae. 

Tliese  little  rural  episodes  in  no  way  interfered  with  a  re- 
newal of  vigorous  hostilities  in  New  York.  While  Judge 
Balcom  was  appointing  his  referee,  Judge  Cardozo  gianted  an 
order  for  a  rcargument  in  the  Belmont  suit,  —  which  brought 
up  Jigain  the  appointment  of  Judge  Davios  as  receiver,  —  and 
assigned  the  hearing  for  the  Gth  of  December.  This  step  on 
his  part  bore  a  curious  resemblance  to  certain  of  his  perform- 
ances in  the  notorious  case  of  the  Wood  leases,  and  made  the 
plan  of  operations  perfectly  clear.  The  period  during  w^hich 
Judge  Sutherland  was  to  sit  in  chambers  was  to  expire  on  the 
4th  of  December,  and  Cardozo  himself  was  to  succeed  him ; 
he  now,  therefore,  proposed  to  signalize  his  associate's  depart- 
ure fi'om  chaml)ei-8  by  reviewing  his  orders.  No  sooner  had 
he  gi'anted  the  motion,  than  the  opposing  comisel  applied  to 
Judge  Sutherland,  who  forthwith  issued  an  order  to  sTiow 
cause  why  the  reargument  ordered  by  Judge  Cardozo  should 
not  take  place  at  once.  Upon  which  the  counsel  of  the  Erie 
Road  instantly  ran  over  to  Judge  Cardozo,  who  vacated  Judge 
Sutherl.ind's  order  out  of  hand.  Tlio  lawyers  then  left  him 
and  ran  back  to  Judge  Sutherland  with  a  motion  to  vacate 
this  last  order.  The  contest  was  now  becoming  altogether  too 
ludicrous.  Somebod}'  must  yield,  and  when  it  was  reduced  to 
that,  the  honest  Sutherland  was  j^retty  sure  to  give  way  to  the 
8»d)tle  Cardozo.  Accordingly  the  hearing  on  this  last  motion 
was  |)ostponed  until  the  next  morning,  when  Judge  Suther- 
land made  a  not  undignified  statement  as  to  his  position,  and 


A   CHAPTER   OF   ERIE.  87 

closed  by  remitting  the  whole  subject  to  the  succeeding  Mon- 
day, at  which  time  Judge  Cardozo  was  to  succeed  him  in 
chambers.  Cardozo,  therefore,  was  now  iu  undisputed  pos- 
session of  the  field.  In  his  closing  explanation  Judge  Suth- 
erland did  not  quote,  as  he  might  have  done,  the  following 
excellent  passage  from  the  opinion  of  the  court,  of  which  both 
lie  and  Cardozo  were  justices,  delivered  in  the  Schell  case  as 
recently  as  the  last  day  of  the  previous  June  :  "  The  idea  that- 
a  cause,  by  such  mauojuvres  as  have  been  resorted  to  here,  can 
be  withdrawn  from  one  judge  of  this  court  and  taken  pos- 
session of  by  another  ;  that  thus  one  judge  of  the  same  and 
no  other  powers  can  practically  prevent  his  associate  from 
exercising  his  judicial  functions ;  that  thus  a  case  may  be 
taken  from  judge  to  judge  whenever  one  of  the  parties  fears 
that  an  unfavorable  decision  is  about  to  be  rendered  by  the 
judge  who,  up  to  that  time,  had  sat  iu  the  cause,  and  that 
tlnis  a  decision  of  a  suit  may  be  constantly  indefinitely  post- 
poned at  the  will  of  one  of  the  litigants,  only  deserves  to  be 
noticed  as  being  a  curiosity  in  legal  tactics,  —  a  remarkable 
exhibition  of  inventive  genius  and  fertility  of  expedient  to 
emban'ass  a  suit  which  this  extraordinarily  conducted  litiga- 
tion  has  developed Such  a  practice  as   that  disclosed 

by  this  litigation,  sanctioning  the  attempt  to  counteract  the 
orders  of  each  other  in  the  progress  of  the  suit,  I  confess  is 
new  and  shocking  to  me,  ....  and  I  trust  that  we  have  seen 
the  last  in  this  high  tribunal  of  such  practices  as  this  case  has 
exhibited.  No  apprehension,  real  or  fancied,  that  any  judge 
is  about,  either  wilfully  or  innocently,  to  do  a  wrong,  can  pal- 
liate, much  less  justify  it."  *  Neither  did  Judge  Sutherland 
state,  as  he  might  have  stated,  that  this  admirable  expression 
of  the  sentiments  of  the  fidl  bench  was  written  and  delivered 
by  Judge  Albert  Cardozo.  Probably  also  Judge  (Cardozo  and 
all  his  brother  judges,  rural  and  urban,  as  they  used  these 
bow-strings  of  the  law,  right  and  left,  —  as  their  reckless 
orders  and  injunctions  struck  deep  into  business  circles  far 
beyond  the  limits  of  their  State,  —  as  they  degraded  them- 

*  Schell  V.  Ei-ie  Railway  Co.,  51  Barbour's  S.  C.  373,  374. 


88  A   CHAPTER   OF   ERIE. 

selves  in  degrading  their  ordtjr,  and  made  the  ermine  of 
snpreme  justice  scarcely  more  imposing  than  the  motley  of  the 
clown,  —  these  magistrates  may  have  thought  that  they  had 
developed  at  least  a  novel,  if  not  a  respectable,  mode  of  con- 
ducting litigation.  They  had  not  done  even  this.  They  had 
Bimpl}^  so  far  as  in  them  lay,  turned  back  the  wheels  of 
pi'ogress  and  reduced  the  America  of  the  nineteenth  century 
to  the  level  of  the  France  of  the  sixteenth.  "  The  advocates 
and  judges  of  our  times  find  bias  enough  in  all  causes  to  ac- 
commodate them  to  what  they  themselves  think  fit 

What  one  court  has  determined  one  way  another  determines 
quite  contrary,  and  itself  contrary  to  that  at  another  time  ; 
of  which  we  see  very  frequent  examples,  owing  to  that  practice 
admitted  among  us,  and  which  is  a  marvellous  blemish  to  the 
ceremonious  authority  and  lustre  of  our  justice,  of  not  abiding 
by  one  sentence,  but  running  from  judge  to  judge,  and  court 
to  court,  to  decide  one  and  the  same  cause."  * 

It  was  now  very  clear  that  Receiver  Davies  might  abandon 
all  hope  of  operating  the  Erie  Kail  way,  and  that  Messrs. 
Gould  and  Fisk  were  borne  upon  the  swelling  tide  of  victory. 
The  prosperous  aspect  of  their  affairs  encouraged  these  last- 
named  gentlemen  to  yet  more  vigorous  offensive  operations. 
The  next  attack  was  upon  Yanderbilt  in  person.  On  Saturday, 
the  5th  of  December,  only  two  days  after  Judge  Sutherland 
and  Keceiver  Davies  were  disposed  of,  the  indefatigable  Fisk 
waited  on  Commodore  Vanderbilt,  and,  in  the  name  of  the 
Erie  Company,  tendered  him  fifty  thousand  shares  of  Erie 
common  stock  at  70.t     As  the  stock  was  then  selling  in  Wall 

•  Montaigne's  Works,  Vol.  II.  p.  ,31C. 

t  Tliroughoiit  tlicse  proccodinps  glimpses  nre  from  time  to  time  obtained  of 
the  more  prominent  chiinicters  in  their  undress,  lis  it  were,  which  have  in  thcra 
n  good  many  elements  both  of  nature  and  humor.  The  following  description 
of  the  visit  in  which  this  tender  was  made  was  subsequently  given  by  Fisk 
on  the  witness-stnnd:  '"I  went  to  his  ( Vanderbilt's)  house;  it  was  a  bad, 
stormy  day,  and  I  had  the  shares  in  a  carpet-bag;  I  told  the  Commodore  I 
jind  come  to  tender  50,000  shares  of  Erie  and  wanted  back  the  money  which 
we  had  paid  for  them  and  tlio  bonds,  and  I  made  a  separate  demand  for  the 
S  1,000,000  wliicli  had  been  paid  to  cover  his  losses;  he  said  he  had  nothing  to 
do  with  the  Erie  now,  and  must  consult  his  counsel;  ....  Mr.  Shearman 


A  CHAPTER   OF   ERIE.  b9 

Street  at  40,  tlie  Commodore  naturally  declined  to  avail  him- 
self of  this  liberal  offer.  He  even  went  further,  and,  disre- 
garding his  usual  wise  policy  of  silence,  wrote  to  the  New 
York  Times  a  short  communication,  in  which  he  referred  to  the 
alleged  terms  of  settlement  of  the  previous  July,  so  far  as 
they  concerned  himself,  and  denied  them  in  the  following 
explicit  language  :  "  I  have  had  no  dealings  with  the  Erie 
Railway  Compan}',  nor  have  I  ever  sold  that  company  any 
stock  or  received  from  them  any  bonus.  As  to  the  siiits  insti- 
tuted by  Mr.  Schell  and  others,  I  had  nothing  to  do  with 
them,  nor  was  I  in  any  way  concerned  in  their  settlement." 
This  was  certainly  an  announcement  calculated  to  confuse  the 
public  ;  but  the  confusion  became  confounded,  when,  upon  the 
10th,  Mr.  Fisk  followed  him  in  a  card  in  which  he  reiterated 
the  alleged  terms  of  settlement,  and  reproduced  two  checks 
of  the  Erie  Company,  of  July  1 1,  1868,  made  payable  to  the 
treasurer  and  by  him  indorsed  to  C.  Vanderbilt,  iipon  whose 
order  they  had  been  paid.  These  two  checks  were  for  the 
sum  of  a  million  of  dollars.  He  further  said  that  the  com- 
pany had  a  paper  in  Mr.  Vanderbilt's  own  handwriting,  stating 
that  he  had  placed  fifty  thousand  shares  of  Erie  stock  in  the 
hands  of  certain  persons,  to  be  delivered  on  payment  of 
$  3,500,000,  which  sum  he  declared  had  been  paid.  Undoubt- 
edly these  apparent  discrepancies  of  statement  admitted  of  an 
explanation  ;  and  some  thin  veil  of  equivocation,  such  as  the 
transaction  of  the  business  through  third  parties,  justified 
Vanderbilt's  statements  to  his  own  conscience.      Comment, 

was  with  nic:  the  date  I  don't  know:  it  was  about  eleven  o'clock  in  the  morn- 
ing: don't  know  tlie  day,  don't  know  the  month,  don't  know  the  year;  I  rode 
up  with  Sliearman,  liolding  the  carpet-bag  tight  between  my  legs;  I  told  him 
he  was  a  small  man  and  not  much  protection;  this  was  dangerous  property, 
you  see,  and  miglit  blow  up;  ...  .  besides  Mr.  Shearman  the  driver  went  in 
with  the  witnesses,  and  besides  the  Commodore  I  spoke  with  the  servant-girl; 
the  Commodore  was  sitting  on  the  bed  with  one  shoe  off  and  one  shoe  on ; 
.  .  .  .  don't  remember  what  more  was  said;  I  remember  the  Commodore  put 
on  his  other  shoe;  I  remember  those  shoes  on  account  of  the  buckles;  you 
see  there  were  four  buckles  on  that  shoe,  and  I  know  it  passed  through  my  . 
mind  that  if  such  men  wore  that  kind  of  shoe  I  must  get  me  a  pair;  this 
p.assed  tlu-ough  my  mind,  but  I  did  not  speak  of  it  to  the  Commodore;  I  was 
very  civil  to  him." 


90  A   CHAPTER   OF   ERIE. 

however,  is  wholly  superfluous,  except  to  call  attention  to  the 
amount  of  weight  which  is  to  be  given  to  the  statements  and 
denials,  apparently  the  most  general  and  explicit,  which  from 
time  to  time  were  made  by  the  parties  to  these  proceedings. 
This  short  controversy  merely  added  a  little  more  discredit  to 
what  was  already  not  deficient  in  that  respect.  On  the  10th 
of  December  the  Erie  Company  sued  Commodore  Vanderbilt 
for  $  3,500,000,  specially  alleging  in  their  complaint  the  par- 
ticulars of  that  settlement,  all  knowledge  of  or  connection 
with  which  the  defendant  had  so  emphatically  denied. 

None  of  the  multifarious  suits  which  had  been  brought  as 
yet  were  aimed  at  Mr.  Drew.  The  quondam  treasurer  had 
apparently  wholly  disappeared  from  the  scene  on  the  19th 
of  November.  Mr.  Fisk  took  advantage,  however,  of  a  leisure 
day,  to  remedy  this  oversight,  and  a  suit  was  commenced 
against  Drew,  on  the  ground  of  certain  transactions  between 
him,  as  treasurer,  and  the  railway  company,  in  relation  to 
some  steamboats  concerned  in  the  trade  of  Lake  Erie.  The 
usual  allegations  of  fraud,  breach  of  trust,  and  other  trifling 
and,  technically,  not  State  prison  offences,  were  made,  and 
damages  were  set  at  a,  million  of  dollars. 

Upon  the  8th  the  argument  in  Belmont's  case  had  been 
reopened  before  Judge  Cardozo  in  New  York,  and  upon  the 
same  day,  in  Oneida  County,  Judge  Boai'dman,  another  justice 
of  the  Supreme  Court,  had  proceeded  to  contribute  his  share 
to  the  existing  complications.  Counsel  in  behalf  of  Receiver 
Davies  had  appeared  before  him,  and,  upon  their  application, 
the  Cardozo  injunction,  which  restrained  the  receiver  from 
taking  possession  of  the  Erie  Railway,  had  been  dissolved. 
Why  this  application  was  made,  or  why  it  was  granted,  sur- 
passes comprehension.  However,  the  next  day,  Judge  Board- 
man's  order  having  been  read  in  court  before  Judge  Cardozo, 
that  magistrate  suddenly  revived  to  a  full  appreciation  of  the 
views  expressed  by  him  in  June  in  regard  to  judicial  inter- 
ference with  judicial  action,  and  at  once  stigmatized  Judge 
Boardman's  action  as  "  extremely  indecorous."  Neglecting, 
however,  the  happy  opportunity  to  express  an  opinion  as  to 


A   CHArTEIl    or    ERIE,  91 

his  own  conduct  during  the  previous  week,  he  simply  stayed 
all  proceedings  under  this  new  order,  and  applied  himself  to 
the  task  of  hearing  the  case  before  him  reargued. 

This  hearing  lasted  many  days,  was  insufferably  long  and 
inexpressibly  dull.  While  it  was  going  on,  upon  the  15th, 
Judge  Nelson,  in  the  United  States'Court,  delivered  his  opin- 
ion in  the  Whelpley  suit,  reversing,  on  certain  technical 
grounds,  the  action  of  Judge  Blatchford,  and  declaring  that 
no  case  for  the  appointment  of  a  receiver  had  been  made  out ; 
accordingly  he  set  aside  that  of  Gould,  and,  in  conclusion, 
sent  the  matter  back  to  the  State  court,  or,  in  other  words,  to 
Judge  Cardozo,  for  decision.  Thus  the  gentlemen  of  the  ring, 
having  been  most  fortunate  in  getting  their  case  into  the  Fed- 
eral court  before  Judge  Blatchford,  were  now  even  more  fortu- 
nate in  getting  it  out  of  that  court  when  it  had  come  before 
Judge  Nelson.  After  this,  room  for  doubt  no  longer  existed. 
Brilliant  success  at  every  point  had  crowned  the  strategy 
of  the  Erie  directors.  For  once  Vanderbilt  was  effectually 
routed  and  driven  from  the  field.  That  he  shrunk  from  con- 
tinuing the  contest  against  such  op^wnents  is  much  to  his 
credit.  It  showed  that  he,  at  least,  was  not  prepared  to  see 
how  near  he  could  come  to  the  doors  of  a  State  prison  and  yet 
not  enter  them  ;  that  he  did  not  care  to  take  in  advance  the 
opinion  of  leading  comisel  as  to  whether  what  he  meant  to  do 
might  place  him  in  the  felons'  dock.  Thus  Erie  was  wholly 
given  over  to  the  conti-ol  of  the  ring.  No  one  seemed  any 
longer  to  dispute  their  right  and  power  to  issue  as  much  new 
stock  as  might  seem  to  them  expedient.  Injunctions  had 
failed  to  check  them  ,  receivers  had  no  terrors  for  them.  Se- 
cure in  their  power,  they  now  extended  their  operations  over 
sea  and  land,  leasing  railroads,  buying  steamboats,  ferries, 
theatres,  and  rolling-mills,  building  connecting  links  of  road, 
laying  down  additional  rails,  and,  generally,  proving  them- 
selves a  power  wherever  corporations  were  to  be  influenced  or 
legislatures  were  to  be  bought. 

Christmas,  the  period  of  peace  and  good-will,  was  now 
approaching.     The  dreary  arguments   before   Judge  Cardozo 


92  A   CHAPTER   OF   ERIE. 

had  terminated  .on  December  18,  long  after  the  press  and 
the  public  had  ceased  to  pay  any  attention  to  them,  and  al- 
ready rumors  of  a  settlement  were  rife.  Yet  it  was  not  meet 
that  the  settlement  should  be  effected  without  some  final 
striking  catastrophe,  some  characteristic  concluding  tableau. 
Among  the  many  actions  which  had  incidentally  sprung  from 
these  proceedings  was  one  against  Mr.  Samuel  Bowles,  the 
editor  of  the  Springfield  Republican,  brought  by  Mr.  Fisk  in 
consequence  of  an  ai'ticle  which  had  appeared  in  that  paper, 
reflecting  most  severely  on  Fisk's  proceedings  and  private 
character,  —  his  past,  his  present,  and  his  probable  future. 
On  the  2 2d  of  December,  Mr.  Bowles  happened  to  be  in  New 
York,  and,  as  he  was  standing  in  the  office  of  his  hotel,  talk- 
ing with  a  friend,  was  suddenly  arrested  on  the  warrant  of 
Judge  McCunn,  hurried  into  a  carriage,  and  driven  to  Ludlow 
Street  Jail,  where  he  was  locked  up  for  the  night.  Tliis  ex- 
cellent jest  afforded  intense  amusement,  and  was  the  cause 
of  much  wit  that  evening  at  an  entertainment  given  by  the 
Tammany  ring  to  the  newly  elected  mayor  of  New  York,  at 
which  entertainment  Mr.  James  Fisk,  Jr.,  was  an  honored 
guest.  The  next  morning  the  whole  press  was  in  a  state  of 
high  indignation,  and  Mr.  Bowles  had  suddenly  become  the 
bcst-iwlvertised  editor  in  the  country.  At  an  early  hour  ho 
was,  of  course,  released  on  bail,  and  with  this  outrage  the 
second  Erie  contest  was  brought  to  a  close.  It  seemed  right 
and  proper  tliat  proceedings  which,  throughout,  had  set  ])ub- 
lic  opinion  at  defiance,  and  in  which  the  Stock  Exchange,  the 
courts,  and  the  legislature  had  come  in  for  e(|ual  mcustu'es 
of  opprobrium  for  their  disregard  of  private  rights,  sliould  be 
terminated  by  an  exhibition  of  petty  spite,  in  which  bench  and 
bar,  judge,  sheriff,  and  jailer,  lent  themselves  with  base  sub- 
serviency to  a  violation  of  the  liberty  of  the  citizen. 

It  was  not  imtil  the  10th  of  Fcbmiary  that  Judge  Cardi)Zo 
published  his  decision  setting  aside  the  Sutherland  receiver- 
ship, and  establishing  on  a  basis  of  authority  the  right  to 
over-issue  stock  at  jjleasurc.  The  subject  was  then  as  obsolete 
and  forgotten  as  though   it  had  never  absorbed  the  public 


A   CHAPTER   OF   ERIE.  93 

attention.  And  another  "settlement"  had  already  been 
effected.  The  details  of  this  arrangement  have  not  been 
dragged  to  light  through  the  exposures  of  subsequent  litiga- 
tion. But  it  is  not  difficult  to  see  where  and  how  a  combina- 
tion of  overpowering  influence  may  have  been  effected,  and  a 
guess  might  even  be  hazarded  as  to  its  objects  and  its  victims. 
The  tact  that  a  settlement  had  been  arrived  at  was  intimated 
in  the  papers  of  the  2Gth  of  December.  On  the  19th  of  the 
same  month  a  stock  divideiid  of  eighty  per  cent  in  the  New 
York  Central  had  been  suddenly  declared  by  Vanderbilt. 
Presently  the  legislature  met.  While  the  Erie  ring  seemed  to 
have  good  reasons  for  apprehending  hostile  legislation,  Van- 
derbilt, on  his  part,  might  have  feared  for  the  success  of  a  bill 
which  was  to  legalize  his  new  stock.  But  hardly  a  voice  was 
raised  against  the  Erie  men,  and  the  bill  of  the  Central  was 
safbly  carried  through.  This  curious  al)sence  of  opposition  did 
not  stop  here,  and  soon  the  two  parties  were  seen  united  in  an 
active  alliance.  Vanderbilt  wanted  to  consolidate  his  roads  ; 
the  Erie  directors  wanted  to  avoid  the  formality  of  annual 
elections.  Thereupon  two  other  bills  went  hastily  through 
this  honest  and  patriotic  legislature,  the  one  authorizing  the 
Erie  Board,  which  had  been  elected  for  one  year,  to  classify 
itself  so  that  one  fifth  only  of  its  members  should  vacate 
office  during  each  succeeding  year,  the  other  consolidating  the 
Vanderbilt  roads  into  one  colossal  monopoly.  Public  interests 
and  i)rivate  rights  seem  equally  to  have  been  the  victims. 
It  is  impossible  to  say  that  the  beautiful  unity  of  interests 
which  led  to  such  results  wiis  the  fulfilment  of  the  December 
settlement  ;  but  it  is  a  curious  fact  that  the  same  paper  which 
announced  in  one  column  that  Vanderbilt's  two  measures, 
known  as  the  consolidation  and  Central  scrip  bills  had  gone  to 
the  Governor  for  signature,  sliould,  in  another,  have  reported 
the  discontinuance  of  the  Belmont  and  Whelpley  suits  by  the 
consent  of  all  interested.*  It  may  be  that  public  and  private 
interests  were  not  thus  balanced  and  traded  away  in  a  servile 
legislature,  but  the  strong  probabilities  arc  that  the  settlement 

*  See  tlie  New  York  Tribune  of  ilsiy  10,  1869. 


94  A   CHAPTER   OF   ERIE. 

of  December  made  white  even  that  of  July.  Meanwhile  the 
conquerors  —  the  men  whose  names  had  been  made  notorious 
through  the  whole  land  in  all  these  infamous  proceedings  — 
were  at  last  undisputed  masters  of  the  situation,  and  no  man 
questioned  the  firmness  of  their  gi'asp  oti  the  Erie  Railway. 
They  walked  erect  and  proud  of  their  infamy  through  the 
streets  of  our  great  cities  ;  they  voluntarily  subjected  them- 
selves to  that  to  which  other  depredators  are  compelled  to 
submit,  and,  by  exposing  their  portraits  in  public  conveyances, 
converted  noble  steamers  into  branch  galleries  of  a  police- 
office  ;  nay,  more,  they  bedizened  their  persons  with  gold  lace, 
and  assumed  honored  titles,  until  those  who  witnessed  in 
silent  contempt  their  strange  antics  were  disposed  to  exclaim 
in  the  language  of  poor  Doll  Tearsheet  :  "  An  Admiral !  God's 
light,  these  villains  will  make  the  word  as  odious  as  the  word 
'occupy,'  which  was  an  excellent  good  word  before  it  was  ill 
sorted  ;  therefore,  Admirals  had  need  look  to  't." 


The  subsequent  history  of  the  Erie  Railway,  under  the 
management  of  the  men  who  had  thus  succeeded  in  gaining 
absolute  control  over  it,  forms  no  part  of  this  nan-ative.  The 
attempt  has  been  made  simply  to  trace  the  course  of  events 
which  resulted  in  placing  a  national  thoroughfare  in  the  hands 
of  unscrupulous  gamblers,  and  to  describe  the  complications 
■which  marked  their  progress  to  power.  The  end  was  finally 
attained,  when,  after  every  opponent  had,  by  fair  means  or  by 
foul,  been  driven  from  the  conflict,  that  strange  law  wtis  en- 
acted which  assured  these  men,  elected  for  one  year,  a  five 
yeai-s'  term  of  power,  beyond  the  control  of  their  stockholders. 
From  that  moment  all  the  great  resources  of  the  Erie  Railway 
became  mere  engines  with  which  to  work  their  lawless  will. 

Comment  would  only  weaken  the  force  of  this  narrative. 
It  sufficiently  suggests  its  ovm  moral.  The  facts  which  have 
been  set  forth  cannot  but  have  revealed  tt)  every  observant 
eye  the  deep  decay  which  has  eaten  into  our  social  edifice. 
No  portion  of  our  system  was  left  untested,  and  no  portion 


A   CHAPTER   OF   ERIE.  96 

showed  itself  to  be  sound.  The  stock  exchange  revealed 
itself  as  a  liaiuit  of  gamblers  and  a  den  of  thieves ;  the  offices 
of  our  great  corporations  appeared  as  the  secret  chambers  in 
which  trustees  plotted  the  spoliation  of  their  wards ;  the  law 
became  a  ready  engine  for  the  furtherance  of  wi'ong,  and  the 
ermine  of  the  judge  did  not  conceal  the  eagerness  of  the  par- 
tisan ;  the  halls  of  legislation  were  transformed  into  a  mart  in 
which  the  price  of  votes  was  higgled  over,  and  laws,  made  to 
order,  were  bought  and  sold ;  while  under  all,  and  through  all, 
the  voice  of  public  opinion  was  silent  or  was  disregarded. 

It  is  not,  however,  in  connection  with  the  present  that  all 
this  has  its  chief  significance.  It  speaks  ominously  for  the 
future.  It  may  be  that  our  society  is  only  passing  through  a 
period  of  ugly  transition,  but  the  present  evil  has  its  root  deep 
down  in  the  social  organization,  and  springs  from  a  diseased 
public  opinion.  Failure  seems  to  be  regarded  as  the  one  unpar- 
donable crime,  success  as  the  all-redeeming  virtue,  the  acqui- 
sition of  wealth  as  the  single  worthy  aim  of  life.  Ten  years 
ago  such  revelations  as  these  of  the  Erie  Railway  would  have 
sent  a  shudder  through  the  community,  and  would  have 
placed  a  stigma  on  every  man  who  had  had  to  do  with  them. 
Now  they  merely  incite  others  to  surpass  them  by  yet  bolder 
outrages  and  more  coiTupt  combinations.  Were  this  not  so, 
these  things  would  be  as  impossible  among  us  now  as  they  are 
elsewhere,  or  as  they  were  here  not  many  years  ago.  While 
this  continues  it  is  mere  weakness  to  attribute  the  conse- 
quences of  a  lax  morality  to  a  defective  cun'ency,  or  seek  to 
prevent  its  outward  indications  by  statute  remedies.  The  root 
of  the  disease  is  deep  ;  external  applications  will  only  hide  its 
dangerous  symptoms.  It  is  well  to  reform  the  currency,  it  is 
well  to  enact  laws  against  malefactors ;  but  neither  the  one 
nor  the  other  will  restore  health  to  a  business  community 
which  tolerates  successful  fraud,  or  which  honors  wealth  more 
than  honesty. 

One  leading  feature  of  these  developments,  however,  is, 
from  its  political  aspect,  especially  worthy  of  the  attention  of 
the  American  people.     Modern  society  has  created  a  chiss 


96  A   CHAPTER    OF   ERIE. 

of  artificial  beings  who  bid  fair  soon  to  be  the  masters  of  their 
creator.  It  is  but  a  very  few  years  since  the  existence  of  a 
corporation  controlHng  a  few  niilhons  of  dollars  was  regarded 
as  a  subject  of  gi'ave  apprehension,  and  now  this  country 
already  contains  single  organizations  which  wield  a  power  rep- 
resented by  hundreds  of  millions.  These  bodies  are  the  crea- 
tiu'es  of  single  States ;  but  in  New  York,  in  Peuns}lvania,  in 
Maryland,  in  New  Jersey,  and  not  in  those  States  alone,  they 
are  already  establishing  despotisms  which  no  spasmodic  popu- 
lar effort  will  be  able  to  shake  off.  Everywhere,  and  at  all 
times,  however,  they  illustrate  the  truth  of  the  old  maxim  of 
the  common  law,  that  corporations  have  no  souls.  Only  in 
New  York  has  any  intimation  yet  been  given  of  what  the 
future  may  have  in  store  for  us  should  these  great  powers 
become  mere  tools  in  the  hands  of  ambitious,  reckless  men. 
The  system  of  corporate  life  and  corporate  power,  as  applied 
to  industrial  development,  is  yet  in  its  infancy.  It  tends 
always  to  development,  —  always  to  consolidation,  —  it  is  ever 
grasping  new  powers,  or  insidiously  exercising  covert  influ- 
ence. Even  now  the  system  threatens  the  central  government. 
The  Erie  Railway  represents  a  weak  combination  compared  to 
those  which  day  by  day  are  consolidating  under  the  unsus- 
pecting eyes  of  tlie  community.  A  very  few  years  more,  and 
we  shall  see  corporations  as  much  exceeding  the  Erie  and  the 
New  York  Central  in  both  ability  and  will  for  corruption  as 
they  will  exceed  those  roads  in  wealth  and  in  length  of  iron 
track.  We  shall  see  these  great  corporations  spanning  the 
continent  from  ocean  to  ocean,  —  single,  consolidated  lines, 
not  connecting  Albany  with  Buffalo,  or  Lake  Erie  with  the 
Hudson,  but  uniting  the  Atlantic  and  the  Pacific,  and  bringing 
New  York  nearer  to  San  Francisco  than  Albany  once  was  to 
Buffalo.  Already  the  disconnected  members  of  these  future 
leviathans  have  built  up  States  in  the  wilderness,  and  chosen 
their  attorneys  senators  of  tlic  I'nitcd  States.  Now  their 
power  is  in  its  infancy ;  in  a  very  few  years  they  will  re-enact, 
on  a  larger  theatre  and  on  a  grander  scale,  with  every  feature 
miigniiicd,  the  scenes  which  were  lately  witnessed  on  the  nar- 


A   CHAPTER   OF   ERIE.  .  97 

row  stage  of  a  single  State.  The  public  corruption  is  the 
foundation  on  which  corporations  always  depend  for  their 
political  power.  There  is  a  natural  tendency  to  coalition  be- 
tween them  and  the  lowest  strata  of  political  intelligence  and 
morahty  ;  for  their  agents  must  obey,  not  question.  They 
exact  success,  and  do  not  cultivate  political  morality.  The 
lobby  is  their  home,  and  the  lobby  thrives  as  political  virtue 
decays.  The  ring  is  their  symbol  of  power,  and  the  ring  is 
the  natural  enemy  of  political  purity  and  independence.  All 
this  was  abundantly  illustrated  in  the  events  which  have  just 
been  narrated.  The  existing  coalition  between  the  Erie  Rail- 
way and  the  Tammany  ring  is  a  natural  one,  for  the  former 
needs  votes,  the  latter  money.  This  combination  now  controls 
the  legislature  and  courts  of  New  York ;  that  it  controls  also 
the  Executive  of  the  State,  as  well  as  that  of  the  city,  was 
proved  when  Governor  Hoffman  recorded  his  reasons  for  sign- 
ing the  infamous  Erie  Directors'  Bill.  It  is  a  new  power,  for 
which  our  language  contains  no  name.  We  know  what  aris- 
tocrac}^,  autocracy,  democracy  are;  but  we  have  no  word  to 
express  government  by  moneyed  corporations.  Yet  the  people 
already  instinctively  seek  protection  against  it,  and  look  for 
such  protection,  significantly  enough,  not  to  their  own  legisla- 
tures, but  to  the  single  autocratic  feature  retained  in  our 
system  of  government,  —  the  veto  by  the  Executive.  In  this 
there  is  something  more  imperial  than  republican.  The  peo- 
ple have  lost  faith  in  themselves  when  they  cease  to  have  any 
faith  in  those  whom  they  uniformly  elect  to  represent  them. 
The  change  that  has  taken  place  in  this  respect  of  late  years 
in  America  has  been  startling  in  its  rapidity.  Legislation  is 
more  and  more  falling  into  contempt,  and  this  not  so  much  on 
account  of  the  extreme  ignorance  manifested  in  it  as  because 
of  the  corrupt  motives  which  are  believed  habitually  to  actu- 
ate it.  Thus  the  influence  of  corporations  and  of  class  inter- 
ests is  steadily  destroying  that  belief  in  singleness  of  purpose 
which  alone  enables  a  representative  government  to  exist,  and 
the  community  is  slowly  accustoming  itself  to  look  for  pro- 
tection, not  to  public  opinion,  but  to  some  man  in  high  place 


98  A   CHAPTER   OF   ERIE. 

and  armed  with  gi-eat  executive  powers.  Him  they  now  think 
they  can  hold  to  some  accountabiUty.  It  remains  to  be 
seen  what  the  next  phase  in  this  process  of  gradual  develop- 
ment will  be.  History  never  quite  repeats  itself,  and,  as  was 
suggested  in  the  first  pages  of  this  narrative,  the  old  familiar 
enemies  may  even  now  confront  us,  though  arrayed  in  such  a 
modern  garb  that  no  suspicion  is  excited.  Americans  are  apt 
pupils,  and  among  them  there  are  probably  some  who  have 
not  observed  Fisk  and  Vanderbilt  and  Hoffman  without  a 
thought  of  bettering  their  instructions.  No  successful  mili- 
tary leader  will  repeat  in  America  the  threadbare  experiences 
of  Europe ;  —  the  executive  power  is  not  likely  to  be  seized 
while  the  legislative  is  suppressed.  The  indications  would 
now  seem  rather  to  point  towards  the  corruption  of  the  legis- 
lative and  a  quiet  assumption  of  the  executive  through  some 
combination  in  one  vigorous  hand  of  those  influences  which 
throughout  this  narrative  have  been  seen  only  in  conflict. 
As  the  Erie  ring  represents  the  combination  of  the  corporation 
and  the  hired  proletariat  of  a  gi-eat  city  ;  as  Vanderbilt  em- 
bodies the  autocratic  power  of  Csesarism  introduced  into  cor- 
porate life,  and  as  neither  alone  can  obtain  complete  control 
of  the  government  of  the  State,  it,  perhaps,  only  remains  for 
the  coming  man  to  carry  the  combination  of  elements  one 
step  in  advance,  and  put  Cajsarism  at  once  in  control  of  the 
corporation  and  of  the  proletariat,  to  bring  our  vaunted  insti- 
tutions within  the  rule  of  all  historic  precedent. 

It  is  not  pleasant  to  take  such  views  of  the  future  ;  yet 
they  are  in-esistibly  suggested  by  the  events  which  have  been 
narrated.  They  seem  to  be  in  the  nature  of  direct  inferences. 
The  only  remedy  lies  in  a  renovated  public  opinion  ;  but  no 
indication  of  this  has  as  yet  been  elicited.  People  did  indeed, 
at  one  time,  watch  these  Erie  developments  with  interest,  but 
the  feeling  excited  was  rather  one  of  amazement  than  of  in- 
dignation. Even  where  a  real  indignation  was  excited,  it  led 
to  no  sign  of  any  persistent  effort  at  refonn  ;  it  betrayed  it- 
self only  in  aimless  denunciation  or  in  sad  forebodings.  The 
danger,  however,  is  day  by  day  increasing,  and  the  period  dur- 


A   CHAPTER    OF   ERIE.  99 

ing  which  the  work  of  regeneration  should  begin  grows  always 
shorter.  It  is  true  that  evils  ever  work  their  own  cure,  but 
the  cure  for  the  evils  of  Roman  civilization  was  worked  out 
through  ten  centiwies  of  barbarism.  It  remains  to  be  seen 
whetlier  this  people  retains  that  moral  vigor  which  can  alone 
awaken  a  sleeping  public  opinion  to  healthy  and  jjersistent 
activity,  or  whether  to  us  also  will  apply  these  words  of  the 
latest  and  best  historian  of  the  Roman  republic  :  "  What  De- 
mosthenes said  of  his  Athenians  was  justly  applied  to  the 
Romans  of  this  period  ;  that  people  were  very  zealous  for 
action  so  long  as  they  stood  round  the  platform  and  listened 
to  proposals  of  reform ;  but,  when  they  went  home,  no  one 
thought  further  of  what  he  had  heard  in  the  market-place. 
However  those  refonners  might  stir  the  fire,  it  was  to  no  pur- 
pose, for  the  inflammable  material  was  wanting."  * 

*  Mommsen,  Vol.  IV.  p.  91,  referring  to  the  early  Ciceronian  period,  b.  c.  75. 


THE  NEW  YORK  GOLD  CONSPIRACY.* 


House  of  Representatives.  Report,  No.  31.  FoHy -first  Con- 
gress, Second  Session.  Report  of  the  Committee  on  Banking 
and  Currency,  in  response  to  a  Resolution  of  the  House  of 
Representatives,  passed  December  13,  1869,  directing  the  Com- 
mittee "  to  investigate  the  causes  that  led  to  the  unusual  and 
extraordinary  fi.uct  nations  of  Gold  in  the  City  of  New  York, 
from  the  21st  to  the  27th  of  September,  1869  "  ;  accompanied 
by  the  Testimony  collected  by  the  Committee. 

THE  civil  war  in  America,  with  its  enormous  issues  of  depre- 
ciating currency,  and  its  reckless  waste  of  money  and  credit 
by  the  government,  created  a  speculative  mania  such  as  the 
United  States,  with  all  its  experience  in  this  respect,  had  never 
before  known.  Not  only  in  Broad  Street,  the  centre  of  New 
York  speculation,  but  far  and  wide  throughout  the  Northern 
States,  almost  every  man  who  had  money  at  all  employed  a 
part  of  .his  capital  in  the  purchase  of  stocks  or  of  gold,  of  coj)- 
per,  of  petroleum,  or  of  domestic  produce,  in  the  hope  of  a 
rise  in  prices,  or  staked  money  on  the  expectation  of  a  fall. 
To  use  the  jargon  of  the  street,  every  farmer  and  every  shoj)- 
keeper  in  the  country  seemed  to  be  engaged  in  "  carrying " 
some  favorite  security  "■  on  a  margin."  Whoever  could  obtain 
five  pounds  sent  it  to  a  broker  with  oitlers  to  buy  fifty  pounds' 
worth  of  stocks,  or  whatever  amount  the  broker  would  consent 
to  purchase.     If  the  stock  rose,  the  speculator  prospered  ;  if 

•  From  the  Westminster  Review,  for  October,  1870. 


THE  NKW  YORK  GOLD  CONSPIRACY.       101 

it  fell  until  the  five  pounds  of  deposit  or  margin  were  lost,  the 
broker  demanded  a  new  deposit,  or  sold  the  stock  to  protect 
himself.  By  means  of  this  simple  and  smooth  machinery, 
which  differs  in  no  essential  respect  from  the  processes  of 
roulette  or  rouge-et-noir,  the  whole  nation  flung  itself  into  the 
Stock  Exchange,  \uitil  the  "  outsiders,"  as  they  were  called,  in 
opposition  to  the  regular  brokers  of  Broad  Street,  represented 
nothing  less  than  the  entire  population  of  the  American  Re- 
public. Every  one  speculated,  and  for  a  time  every  one 
speculated  successfully. 

The  inevitable  reaction  began  when  the  government,  about 
a  year  after  the  close  of  the  war,  stopped  its  issues  and  ceased 
borrowing.  The  greenback  currency  had  for  a  moment  sunk 
to  a  value  of  only  37  cents  to  the  dollar.  It  is  even  asserted 
that  on  the  worst  day  of  all,  the  11th  of  July,  18G4,  one  sale 
of  £20,000  in  gold  was  actually  made  at  310,  which  is  equiva- 
lent to  about  33  cents  in  the  dollar.*  At  this  point,  however, 
the  depreciation  stopped ;  and  the  paper  which  had  come  so 
near  falling  into  entire  discredit  steadily  rose  in  value,  first 
to  50  cents,  then  to  60,  to  70,  and  within  the  present  year  to 
more  than  90  cents.  So  soon  as  the  industrious  part  of  the 
public  felt  the  touch  of  this  return  to  solid  values,  the  whole 
fabric  of  fictitious  wealth  began  to  melt  away  under  their 
eyes. 

Thus  it  was  not  long  before  the  so-called  "  outsiders,"  the 
men  who  speculated  on  their  own  account,  and  could  not  act 
in  agreement  or  combination,  began  to  suffer.  One  by  one,  or 
in  great  masses,  they  were  made  the  prey  of  the  larger  opera- 
tors; their  last  margins  were  consumed,  and  they  dropped 
down  to  the  solid  level  of  slow,  productive  industry.  Some 
lost  everything  ;  many  lost  still  more  than  they  had,  and  there 
are  few  families  of  ordinary  connection  and.  standing  in  the 
United  States  which  cannot  tell,  if  they  choose,  some  dark 
story  of  embezzlement,  or  breach  of  trust,  committed  in  these 
days.     Some  men,  who  had  courage  and  a  sense  of  honor, 

*  See  Men  and  Mysteries  of  Wall  Street,  by  James  K.  Medberv,  pp.  250, 
261. 


102       THE  NEW  YORK  GOLD  CONSPIRACY. 

found  life  too  heavy  for  them ;  othera  went  mad.  But  the 
greater  pai-t  turned  in  silence  to  their  regular  pursuits,  and 
accepted  their  losses  as  they  could.  Almost  every  rich  Amer- 
ican could  produce  from  some  pigeon-hole  a  bundle  of  worth- 
less securities,  and  could  show  check-books  representing  the 
only  remaining  trace  of  margin  after  margin  consumed  in  vain 
attempts  to  satisfy  the  insatiable  broker.  A  year  or  two  of 
incessant  losses  swept  the  weaker  gamblers  from  the  street. 

But  even  those  who  continued  to  speculate  found  it  neces- 
sary to  change  their  mode  of  operations.  Chance  no  longer 
ruled  over  the  Stock  Exchange  and  the  gold  market.  The 
fate  of  9,  battle,  the  capture  of  a  city,  or  the  murder  of  a 
President,  had  hitherto  been  the  influences  which  broke 
through  the  plans  of  the  strongest  combinations,  and  put  all 
speculators,  whether  gi'eat  or  small,  on  fairly  even  ground  ; 
but  as  the  period  of  sudden  and  uncontrollable  disturbing 
elements  passed  away,  the  market  fell  more  and  more  com- 
pletely into  the  hands  of  cliques  which  found  a  point  of  adhe- 
sion in  some  great  mass  of  incorporated  capital.  Three 
distinct  railways,  with  all  their  enormous  resources,  became 
the  property  of  Cornelius  Vanderbilt,  who,  by  means  of  their 
credit  and  capital,  again  and  again  swept  millions  of  dollars 
into  his  pocket  by  a  process  curiously  similar  to  gambling 
with  loaded  dice.  But  Vanderbilt  was  one  of  the  most  re- 
spectable of  these  great  operatoi"s.  The  Erie  Railway  was 
controlled  by  Daniel  Drew,  and  while  Vanderbilt  at  least  acted 
in  the  interests  of  his  corporations,  Drew  cheated  equally  his 
corporation  and  the  public.  Between  these  two  men  and  the 
immense  incorporated  power  they  swayed,  smaller  operators, 
one  after  another,  were  crushed  to  pieces,  until  the  survivors 
learned  to  seek  shelter  within  some  clique  sufhciently  strong 
to  afford  protection.  Speculation  in  this  manner  began  to 
consume  itself,  and  the  largest  combination  of  caj)ital  w-as  des- 
tined to  swallow  every  weaker  couibination  which  ventured  to 
show  it  itself  in  the  market. 

Thus,  between  the  inevitable  effect  of  a  currency  which 
steadily  shrank  the  apparent  wealth  of  the  country,  and  the 


THE  NEW  YORK  GOLD  CONSPIRACY.       103 

omnipotence  of  capital  in  the  stock  market,  a  sounder  and 
healthier  state  of  society  began  to  make  itself  felt.  Nor 
could  the  unfortunate  public,  which  had  been  robbed  with 
such  cynical  indifference  by  Drew  and  Vanderbilt,  feel  any 
sincere  regret  when  they  saw  these  two  cormorants  reduced  to 
tearing  each  other.  In  the  year  1867  Mr.  Vanderbilt  under- 
took to  gain  possession  of  the  Erie  Eoad,  as  he  had  already 
obtained  possession  of  the  New  York  Central,  the  second 
trunk  line  between  New  York  and  the  West.  Mr.  Vanderbilt 
was  supposed  to  own  property  to  the  value  of  some  £10,000,000, 
all  of  which  might  be  made  directly  available  for  stock  opera- 
tions. He  bought  the  greater  part  of  the  Erie  stock ;  Drew 
sold  him  all  he  could  take,  and  then  issued  as  much  more  as 
was  required  in  order  to  defeat  Vanderbilt's  purpose.  After  a 
violent  struggle,  which  overthrew  all  the  guaranties  of  social 
order,  Drew  triumphed,  and  Mr.  Vanderbilt  abandoned  the 
contest.  The  Erie  corporation  paid  him  a  large  sum  to  reim- 
burse his  alleged  losses.  At  the  same  time  it  was  agreed  that 
Mr.  Drew's  accounts  should  be  passed,  and  he  obtained  a 
release  in  full,  and  retired  from  the  direction.  And  the  Erie 
Road,  almost  exhausted  by  such  systematic  plundering,  was 
left  in  the  undisturbed,  if  not  peaceful,  control  of  Mr.  Jay 
Gould  and  Mr.  James  Fisk,  Jr.,  whose  reign  began  in  the 
month  of  July,  1868. 

Mr.  Jay  Gould  was  a  partner  in  the  firm  of  Smith,  Gould; 
&  Martin,  brokers,  in  Wall  Street.  He  had  been  engaged 
before  now  in  railway  enterprises,  and  his  operations  had  not 
been  of  a  nature  likely  to  encourage  public  confidence- in  his 
ideas  of  fiduciary  relations.  He  was  a  broker,  and  a  broker 
is  almost  by  nature  a  gambler,  perhaps  the  very  last  profession 
suitable  for  a  railway  manager.  In  character  he  was  strongly 
marked  by  his  disposition  for  silent  intrigue.  He  preferred  as 
a  rule  to  operate  on  his  own  account,  without  admitting  other 
persons  into  his  confidence,  and  he  seemed  never  to  be  satis- 
fied except  when  deceiving  every  one  as  to  his  intentions. 
There  was  a  reminiscence  of  the  spider  in  his  nature.  He 
spun  huge  webs,  in  corners  and  in  the  dark,  which  were  sel- 


104       THE  NEW  YORK  GOLD  CONSPIRACY. 

dom  strong  enough  to  resist  a  serious  strain  at  tlie  critical 
moment.  His  disposition  to  this  subtlety  and  elaboration 
of  intrigue  was  irresistible.  It  is  scarcely  necessary  to  say 
that  he  had  not  a  conception  of  a  moral  principle.  In  speak- 
ing of  this  class  of  men  it  must  be  fairly  assumed  at  the  out- 
set that  they  do  not  and  cannot  luiderstaud  how  there  can  be 
a  distinction  between  right  and  wrong  in  matters  of  specula- 
tion, so  long  as  the  daily  settlements  are  punctually  effected. 
In  this  respect  Mr.  Gould  was  probably  as  honest  as  the  mass 
of  his  fellows,  according  to  the  moral  standard  of  the  street ; 
but  without  entering  upon  technical  questions  of  roguery,  it  is 
enough  to  say  that  he  was  an  uncommonly  fine  and  unscru- 
pulous intriguer,  skilled  in  all  the  processes  of  stock-gambling, 
and  passably  indifferent  to  tlie  praise  or  censure  of  society. 

James  Fisk,  Jr.,  was  still  more  original  in  character.  He 
was  not  yet  forty  years  of  age,  and  had  the  instincts  of  four- 
teen. He  came  originally  from  Vermont,  probably  the  most 
respectable  and  correct  State  in  the  Union,  and  his  father  had 
been  a  pcdlcr  who  sold  goods  from  town  to  town  in  his  na- 
tive valley  of  the  Connecticut.  The  son  followed  his  father's 
calling  with  boldness  and  success.  He  drove  his  huge  wagon, 
made  resplendent  with  paint  and  varnish,  with  four  or  six 
horses,  through  the  towns  of  Vermont  and  Western  Massachu- 
setts ;  and  when  his  father  remonstrated  in  alarm  at  his  reck- 
less management,  the  young  man,  with  his  usual  bravado,  took 
his  father  into  his  service  at  a  fixed  salary,  with  the  warning 
that  he  was  not  to  put  on  airs  on  the  strength  of  his  new 
dignity.  A  large  Boston  firm  which  had  supplied  his  goods  on 
credit,  attracted  by  his  energy,  took  him  into  the  house  ;  the 
war  broke  out ;  his  influence  drew  the  firm  into  some  bold 
speculations  which  were  successful ;  in  a  few  years  he  retired 
with  some  .£20,000,  which  he  subsequently  lost.  He  formed 
a  connection  with  Daniel  Drew  in  New  York,  and  a  new  sign, 
ominous  of  future  trouble,  was  raised  in  Wall  Street,  bearing 
the  names  of  Fisk  &  Belden,  brokers. 

Personally  Mr.  Fisk  was  coai*se,  nois}',  boastfid,  ignorant ; 
the  typeof  a  young  butcher  in  appearance  and  mind.     Noth- 


THE  NEW  YORK  GOLD  CONSPIRACY.       105 

ing  could  be  more  striking  than  the  contrast  between  him  and 
his  future  associate  Gould.  One  was  small  and  slight  in  per- 
son, dark,  sallow,  reticent,  and  stealthy,  with  a  trace  of  Jewnsh 
origin.  The  other  was  large,  florid,  gross,  talkative,  and  ob- 
streperous. Mr.  Fisk's  redeeming  point  was  his  humor,  which 
had  a  strong  flavor  of  American  nationality.  His  mind  was 
extraordinarily  fertile  in  ideas  and  expedients,  while  his  conver- 
sation was  filled  with  unusual  images  and  strange  forms  of 
speech,  which  were  caught  up  and  made  popular  by  the  N  w 
York  press.  In  respect  to  honesty  as  between  Gould  and  Fisk, 
the  latter  was,  perhaps,  if  possible,  less  deserving  of  trust 
than  the  former.  A  story  not  without  a  keen  stroke  of  satiri- 
cal wit  is  told  by  him,  which  illustrates  his  estimate  of  abstract 
truth.  An  old  woman  who  had  bought  of  the  elder  Fisk  a 
handkerchief  which  cost  ninepencc  in  the  New  England  cur- 
rency, where  six  shillings  are  reckoned  to  the  dollar,  com- 
plained to  Mr.  Fisk,  Jr.,  that  his  father  had  cheated  her.  Mr. 
Fisk  considered  the  case  maturely,  and  gave  a  decision  based 
on  a  jtriorl  principles.  "  No  !  "  said  he,  "  the  old  man  would  n't 
have  told  a  lie  for  ninepencc  " ;  and  then,  as  if  this  assertion 
needed  some  reasonable  qualification,  he  added,  "though  he 
would  have  told  eight  of  them  for  a  dollar !  "  The  distinction 
as  regards  the  father  may  have  been  just,  since  the  father 
seems  to  have  held  old-feshioned  ideas  as  to  wholesale  and 
retail  trade  ;  but  in  regard  to  the  son  even  this  i  elative  de- 
gree of  truth  cannot  be  predicated  with  any  confidence,  since, 
if  the  Investigating  Committee  of  Congress  and  its  evidence  are 
to  be  believed,  Mr.  Fisk  seldom  or  never  speaks  truth  at  all. 

An  intrigue  equally  siiccessful  and  disreputable  brought 
these  two  men  into  the  Erie  Board  of  Directors,  whence  they 
sj)cedily  drove  their  more  timid  predecessor  Drew.  In  July, 
1808,  Gould  made  himself  President  and  Treasurer  of  the 
corporation.  B^isk  l)ecame  Comptroller.  A  young  lawyer, 
named  Lane,  became  counsel.  These  three  directors  made  a 
majority  of  tlie  Executive  C'ommittee,  and  weie  masters  of 
Erie.  The  Bt)ard  of  Directors  held  no  meetings.  The  Execu- 
tive Committee  was  never  called  together,  and  the  three  men 
5* 


106  THE   NEW   YORK   GOLD   CONSPIRACY. 

—  Fisk,  Gould,  and  Lane  —  became  from  this  time  the  abso- 
lute, irresponsible  owners  of  the  Erie  Railway,  not  less  than  if 
it  had  been  their  personal  property  and  plaything. 

This  property  was  in  effect,  like  all  the  great  railway 
corporations,  an  empire  within  a  republic.  It  consisted  of 
a  trunk  line  of  road  459  miles  in  length,  with  branches 
314  miles  in  extent,  or  773  miles  of  road  in  all.  Its 
capital  stock  amounted  to  about  £7,000,000.  Its  gross  re- 
ceipts exceeded  £3,000,000  per  annum.  It  employed  not 
less  than  15,000  men,  and  supported  their  families.  Over  all 
this  wealth  and  influence,  greater  than  that  directly  swayed 
by  any  private  citizen,  greater  than  is  absolutely  and  person- 
ally controlled  by  most  kings,  and  far  too  great  for  the  public 
safety  either  in  a  democracy  or  in  any  other  form  of  society, 
the  vicissitudes  of  a  troubled  time  placed  two  men  in  irre- 
sponsible authority  ;  and  both  these  men  belonged  to  a  low 
and  degraded  moral  and  social  type.  Such  an  elevation  has 
been  rarely  seen  in  modern  histoiy.  Even  the  most  dramatic 
of  modern  authors,  even  Balzac  himself,  who  so  loved  to  deal 
with  similar  violent  alternations  of  fortune,  or  Alexandre 
Dumas,  with  all  his  extravagance  of  imagination,  never  have 
reached  a  conception  bolder  or  more  melodramatic  than  this, 
nor  have  they  ever  ventured  to  conceive  a  plot  so  enormous, 
or  a  catastrophe  so  original,  as  was  now  to  be  developed. 

One  of  the  earliest  acts  of  the  new  rulers  was  precisely  such 
as  Balzac  or  Dumas  might  have  predicted  and  delighted  in. 
They  established  themselves  in  a  palace.  The  old  offices  of 
the  Erie  Railway  were  in  the  lower  part  of  the  city,  among  the 
wharves  and  warehouses ;  a  situation,  no  doubt,  convenient 
for  business,  but  by  no  means  agreeable  as  a  residence  ;  and 
the  new  proprietors  naturally  wished  to  reside  on  their  prop- 
erty. Mr.  Fisk  and  Mr.  Gould  accordingly  bought  a  huge 
building  of  white  marble,  not  unlike  a  European  palace,  situ- 
ated about  two  miles  from  the  business  quarter,  and  contain- 
ing a  large  theatre  or  opera-house.  They  also  purchased  sev- 
eral smaller  hoxises  adjoining  it.  The  opera-house  cost  about 
£140,000,  and  a  hirge  part  of  the  building  was  at  once  leased, 


THE  NEW  YORK  GOLD  CONSPIRACY.       107 

by  the  two  purchasers,  to  themselves  as  the  Erie  corporation, 
to  serve  as  offices.  This  suite  of  apartments  was  then  fur- 
nished by  themselves,  as  representing  the  corporation,  at  an 
expense  of  some  £60,000,  and  in  a  style  which,  though  called 
vulgar,  is  certainly  not  more  vulgar  than  that  of  the  Presi- 
dent's official  residence,  and  which  would  be  magnificent  in 
almost  any  palace  in  Europe.  The  adjoining  houses  were 
coimocted  with  the  main  building ;  and  in  one  of  these  Mr. 
Fisk  had  his  private  apartments,  with  a  private  passage  to  his 
opera-box.  He  also  assumed  direction  of  the  theatre,  of 
which  he  became  manager-in-chief  To  these  royal  arrange- 
ments he  brought  tastes  which  have  been  commonly  charged 
as  the  worst  results  of  royal  license.  The  atmosphere  of  the 
Erie  offices  was  not  supposed  to  be  disturbed  with  moral  pre- 
judices ;  and  as  the  opera  itself  supplied  Mr.  Fisk's  mind  with 
amusement,  so  the  opera  troupe  supplied  him  with  a  perma- 
nent harem.  Whatever  Mr.  Fisk  did  was  done  on  an  extraor- 
dinary scale. 

These  an*angemcnts,  however,  regarded  only  the  pleasures 
of  the  American  Aladdin.  In  the  conduct  of  their  interests 
the  new  directors  showed  a  capacity  for  large  conceptions,  and 
a  vigor  in  the  execution  of  their  schemes,  such  as  alarmed  the 
entire  community.  At  the  annual  election  in  1868,  when 
Gould,  Fisk,  and  Lane,  having  borrowed  or  bought  proxies  for 
the  gi'cater  paii;  of  the  stock,  caused  themselves  to  be  elected 
for  the  ensuing  year,  the  respectable  portion  of  the  public 
throughout  the  country  was  astonished  and  shocked  to  learn 
that  the  new  Board  of  Directoi*s  contained  two  names  pecu- 
liarly notorious  and  obnoxious  to  honest  men,  —  the  names  of 
William  M.  Tweed  and  Peter  B.  Sweeney.  To  English  ears 
these  commonplace,  not  to  say  vulgar,  titles  do  not  seem  sin- 
gularly alarming  ;  but  to  every  honest  American  they  con- 
veyed a  peculiar  sense  of  terror  and  disgust.  The  State  of 
New  York  in  its  politics  is  much  influenced,  if  not  controlled, 
by  the  city  of  New  York.  The  city  politics  are  so  entirely  in 
the  hands  of  the  Democratic  party  as  to  preclude  even  the  ex- 
istence of  a  strong  minority.     The  party  organization  centres 


108       THE  NEW  YORK  GOLD  CONSPIRACY. 

in  a  political  club,  held  togethei'  by  its  patronage  and  the 
money  it  controls  through  a  system  of  jobbery  unequalled 
elsewhere  in  the  world.  And  the  Tammany  Club,  thus  sway- 
ing the  power  of  a  small  nation  of  several  million  souls,  is  it- 
self ruled  by  William  M.  Tweed  and  Peter  B.  Sw^eeney,  abso- 
lute masters  of  this  terrible  system  of  theft  and  fraud,  and  to 
American  eyes  the  incarnation  of  political  immorality. 

The  effect  of  this  alliance  was  felt  in  the  ensuing  winter  in 
the  passage  of  a  bill  through  the  State  legislature,  and  its  sig- 
nature by  the  Governor,  abolishing  the  foi-mer  system  of  an- 
nual elections  of  the  entire  board  of  Erie  directors,  and 
authorizing  the  board  to  classify  itself  in  such  a  manner  that 
only  a  portion  should  be  changed  each  year.  The  principle 
of  the  bill  was  correct.  Its  practical  effect,  however,  was  to 
enable  Gould  and  Fisk  to  make  themselves  directors  for  five 
years,  in  spite  of  any  attempt  on  the  part  of  the  stockholders 
to  remove  them.  The  formality  of  jumual  re-election  was 
spared  them  ;  and  so  far  as  the  stockholders  were  concerned, 
there  was  no  great  injustice  in  the  act.  The  Erie  Road  was 
in  the  peculiar  position  of  being  without  an  owner.  There 
was  no  cestui  que  trust,  unless  the  English  stockholders  could 
be  called  such.  In  America  the  stock  was  almost  exclusively 
held  for  speculation,  not  for  investment ;  and  in  the  morals  of 
Wall  Street  speculation  means,  or  had  almost  come  to  mean, 
disregard  of  intrinsic  value.  In  this  case  society  at  largo  was 
the  injured  party,  and  society  knew  its  risk. 

This  step,  liowever,  was  only  a  bcgiiming.  The  Tammany 
ring,  as  it  is  called,  exercised  a  ])ower  far  beyond  politics. 
Under  the  existing  constitution  of  the  Stjite.  the  judges  of  the 
State  courts  are  elected  by  the  people.  There  are  thirty- 
three  sucli  judges  in  New  York,  and  each  of  the  thirty -three 
is  clothed  witli  c(}uity  powers  running  through  the  wholo 
State.  Of  these  judges  Tammany  Hall  elected  several,  and 
tl)c  Erie  Railway  controlled  others  in  country  districts.  Each 
of  tliese  judges  might  forbid  proceedings  before  any  and  all 
the  other  judges,  or  stay  proceedings  in  suits  ali'eady  cont- 
meuced.     Thus  the  lives  and  the  property  of  the  public  were 


THE  NEW  YORK  GOLD  CONSPIRACY.       109 

in  the  power  of  the  new  combination  ;  and  two  of  the  city 
judges,  Barnard  and  Cardozo,  had  ah-eady  acquired  a  peculiarly 
infamous  reputation  as  so-called  "  slaves  to  the  ring,"  which 
left  no  question  as  to  the  depths  to  which  their  prostitution 
of  justice  would  descend. 

The  alliance  between  Tammany  and  Erie  was  thus  equiva- 
lent to  investing  Mr.  Gould  and  Mr.  Fisk  with  the  highest 
attributes  of  sovereignty ;  but  in  order  to  avail  themselves  to 
the  utmost  of  their  judicial  powers,  they  also  required  the 
ablest  legal  assistance.  The  degradation  of  the  bench  had 
been  rapidly  followed  by  the  degradation  of  the  bar.  Prom- 
inent and  learned  lawyers  were  already  accustomed  to  avail 
themselves  of  social  or  business  relations  with  judges  to  for- 
ward private  purposes.  One  whose  partner  might  be  elevated 
to  the  bench  was  certain  to  be  generally  retained  in  cases 
brought  before  this  special  judge  ;  and  litigants  were  taught 
bj-  experiejice  that  a  retainer  in  such  cases  was  profitably  be- 
stowed. Others  found  a  similar  advantage  resulting  from 
known  social  relations  with  the  coui't.  The  debasement  of 
tone  was  not  confined  to  the  lower  ranks  of  advocates  ;  and 
it  was  probably  this  steady  demoralization  of  the  bar  which 
made  it  possible  for  the  Erie  ring  to  obtain  the  services  of 
Mr.  David  Dudley  Field  as  its  legal  adviser.  Mr.  Field,  a 
gentleman  of  European  reputation,  in  regard  to  which  he  is 
luiderstood  to  be  peculiarly  solicitous,  was  an  eminent  law 
reformer,  author  of  the  New  York  Code,  delegate  of  the 
American  Social  Science  Association  to  the  European  Interna- 
tional Congress,  and  asserted  by  his  partner,  Mr.  Shearman, 
in  evidence  before  a  committee  of  the  New  York  legislature, 
to  be  a  man  of  quixotic  sense  of  honor.  Mr.  Shearman  him- 
self, a  gentleman  of  English  parentage,  had  earned  public  grat- 
itude by  arraigning  and  deploring,  with  unsurpassed  courage 
and  point,  the  condition  of  the  New  York  judiciary,  in  an 
admirable  essay  wJiich  will  be  foiuid  in  the  Nortli  American 
Review  for  July,  18G7.  The  value  of  Mr.  Field's  services  to 
Messrs.  Fisk  and  (Jould  was  not  to  be  measured  even  by  the 
enormous   fees   their  generosity  paid   him.     His   power  over 


110       THE  NEW  YORK  GOLD  CONSPIRACY. 

certain  judges  became  so  absolute  as  to  impi'css  the  popular 
imagination ;  and  the  gossip  of  AVall  Sti'eet  insists  that  he 
has  a  silken  halter  round  the  neck  of  Judge  Barnard,  and  a 
hempen  one  round  that  of  Cardozo.  It  is  certain  that  he 
who  had  a  jear  before  threatened  Bai'nard  on  his  own  bench 
with  impeachment  now  appeared  in  the  character  of  Bar- 
nard's master,  and  issued  as  a  matter  of  course  the  edicts 
of  his  court. 

One  other  combination  was  made  by  the  Erie  managers  to 
extend  their  power,  and  this  time  it  was  credit  that  was 
threatened.  They  bought  a  joint-stock  bank  in  New  York 
City,  with  a  capital  of  .£200,000.  The  assistance  thus  gained 
was  purchased  at  a  very  moderate  price,  since  it  was  by  no 
means  represented  by  the  capital.  The  great  cliques  and  so- 
called  ' '  operators  "  of  Wall  Sti*eet  and  Broad  Street  carry  on 
their  transactions  by  a  system  of  credits  and  clearing-houses 
with  a  very  limited  use  of  money.  The  banks  certify  their 
checks,  and  the  certified  checks  settle  all  balances.  Nomi- 
nally and  by  law  the  bsuiks  only  certify  to  the  extent  of  bona 
fide  deposits,  but  in  reality  the  custom  of  disregarding  the 
strict  letter  of  the  law  is  not  unknown,  and  in  regard  to  the 
bank  in  question,  the  Comptroller  of  the  Currency,  an  officer 
of  the  National  Treasury,  testifies  that  on  an  examination  of 
its  affairs  in  April,  18G9,  out  of  fifteen  checks  deposited  in  its 
hands  as  security  for  certifications  made  by  it,  selected  at  haz- 
ard for  inquiry,  and  representing  a  nominal  value  of  £300,000, 
three  only  were  good.  The  rest  represented  accommodation 
extended  to  brokers  and  speculators  without  security.  As  an 
actual  fact  it  is  in  evidence  that  this  same  bank  on  Thursday, 
September  24,  1869,  certified  checks  to  the  amount  of  nearly 
£1,. 500, 000  for  Mr.  Gould  alone.  What  sound  security  Mr. 
(Jould  deposited  against  this  mass  of  credit  may  be  left  to  the 
imagination.  His  operations,  however,  were  not  confined  to 
this  bank  alone,  although  this  was  the  only  one  owned  by  the 
ring. 

Thtis  Mr.  Could  and  Mr.  P'isk  created  a  combiuivtion  moie 
powerful  than  any  that  has  been  controlled  by  mere  pi-ivate 


THE  NEW  YORK  GOLD  CONSPIRACY.       Ill 

citizens  iu  America  or  in  Europe  since  society  for  self-protec- 
tion established  the  supreme  authority  of  the  judicial  name. 
They  exercised  the  legislative  and  the  judicial  powers  of  the 
State  ;  they  possessed  almost  unlimited  credit,  and  society  was 
at  their  mercy.  One  authority  alone  stood  above  them,  be- 
yond their  control ;  and  this  was  the  distant  but  threatening 
tigiire  of  the  National  Government. 

Nevertheless,  powerful  as  they  were,  the  Erie  managers 
were  seldom  in  funds.  The  huge  marble  palace  in  which  they 
lived,  the  theatre  which  they  supported,  the  reckless  bribery 
and  profusion  of  management  by  which  they  could  alone  main- 
tain their  defiance  of  public  opinion,  the  enormous  schemes 
for  extending  their  operations  into  which  they  rushed  with 
utter  recklessness,  all  required  gi-eater  resources  than  could  be 
furnished  even  by  the  wholesale  plunder  of  the  Erie  Road. 
They  were  obliged  from  time  to  time  to  issue  from  their  castle 
and  harry  the  industrious  pviblic  or  their  brother  freebooters. 
The  process  was  diiferent  from  that  known  to  the  dark  ages, 
but  the  objects  and  the  results  were  equally  robbery.  At  one 
time  Mr.  Fisk  is  said  to  have  ordered  heavy  speculative  sales 
of  stock  in  an  express  company  which  held  a  contract  with 
the  Erie  Railway.  The  sales  being  effected,  the  contract  was 
declared  annulled.  The  stock  naturally  fell,  and  Mr.  Fisk 
realized  the  difference.  He  then  ordered  heavy  purchases, 
and  having  renewed  the  contract  the  stock  rose  again,  and  Mr. 
Fisk  a  second  time  swept  the  street.*  In  the  summer  and 
autumn  of  1869  the  two  managei-s  issued  and  sold  235,000 
new  shares  of  Erie  stock,  or  nearly  as  much  as  its  entire  capital 
when  they  assumed  power  in  July,  18G8.  With  the  aid  of  the 
money  thus  obtained,  they  succeeded  in  withdrawing  about 
^2,-500,000  in  currency  fi'om  circulation  at  the  very  moment 
of  the  jear  when  currency  was  most  in  demand  in  order  to 
harvest  the  crops.  For  weeks  the  whole  nation  writhed  and 
quivered  under  the  torture  of  this  modern  rack,  until  the 
national  government  itself  was  obliged  to  interfere  and  threaten 
a  sudden    o])ening  of  the  treasury.     But  whether   the   Erie 

•  Men  and  Mysteries  of  Wall  Street,  p.  168. 


112       THE  NEW  YORK  GOLD  CONSPIRACY. 

speculators  operated  for  a  rise  or  operated  for  a  fall,  whether 
they  bought  or  sold,  and  whether  they  were  engaged  in  manip- 
ulating stocks,  or  locking  up  currency,  or  cornering  gold,  they 
were  always  a  public  nuisance  and  scandal. 

In  order  to  explain  the  operation  of  a  so-called  corner  in 
gold  to  ordinary  readers  with  the  least  possible  use  of  slang  or 
technical  phrases,  two  preliminary  statements  are  necessary. 
In  the  first  place  it  must  be  understood  that  the  supply  of 
gold  immediately  available  for  transfers  is  limited  within  dis- 
tinct bounds  in  America.  New  York  and  the  country  behind 
it  contain  an  amount  usually  estimated  at  about  £4,000,000. 
The  national  government  commonly  holds  from  £15,000,000 
to  .£20,000,000,  which  may  be  thrown  bodily  on  the  market 
if  the  President  orders  it.  To  obtain  gold  from  Europe  or 
other  sources  requires  time. 

In  the  second  place,  gold  in  America  is  a  commodity  bought 
and  sold  like  stocks  in  a  special  market  or  gold-room  which  is 
situated  next  the  Stock  Exchange  in  Broad  Street  and  is  prac- 
tically a  part  of  it.  In  gold  as  in  stocks,  the  transactions  are 
both  real  and  speculative.  The  real  transactions  are  mostly  pur- 
chases or  loans  made  by  importers  who  require  coin  to  pay 
customs  on  their  imports.  This  legitimate  business  is  sup- 
posed to  require  from  £1,000,000  to  £1,500,000  per  day. 
The  speculative  transactions  are  mere  wagers  on  the  rise  or 
fall  of  price,  and  neither  require  any  actual  transfer  of  gold, 
nor  even  imply  its  existence,  although  in  times  of  excitement 
hundreds  of  millions  nominally  are  bought,  sold,  and  loaned. 

Under  the  late  administration  Mr.  McCuUoch,  then  Secre- 
tary of  the  Treasury,  had  thought  it  his  duty  at  least  to 
guarantee  a  stable  currency,  altliough  Congress  forbade  him 
to  restore  the  gold  standard.  During  four  years  gold  had 
fluctuated  little,  and  principally  from  natural  causes,  and  the 
danger  of  attempting  to  create  an  artificial  scarcity  in  it  had 
prevented  the  operators  from  trying  an  experiment  which 
would  have  been  aure  to  irritate  the  govenmient.  The  finan- 
cial policy  of  the  new  administration  was  not  so  definitely 
fixed,  and  the  •success  of  a  speculation  would  depend  on  the 


THE  NEW  YORK  GOLD  CONSPIRACY.       113 

action  of  Mr.  Boutwell,  the  new  secretary,  wliose  direction  was 
understood  to  have  begun  by  a  marked  censure  on  the  course 
pursued  by  his  predecessor. 

Of  all  financial  operations,  cornering  gold  is  the  most  bril- 
liant and  the  most  dangerous,  and  possibly  the  very  hazard 
and  splendor  of  the  attempt  were  the  reasons  of  its  fascina- 
tion to  Mr.  Jay  Gould's  fancy.  He  dwelt  upon  it  for  months, 
and  played  with  it  like  a  pet  toy.  His  fertile  mind  even  went 
so  far  as  to  discover  that  it  would  prove  a  blessing  to  the 
community,  and  on  this  ingenious  theory,  half  honest  and 
half  fraiidulent,  he  stretched  the  widely  extended  fabric  of  the 
web  in  which  all  mankind  was  to  be  caught.  This  theory 
was  in  itself  partially  sound.  Starting  from  the  principle  that 
the  price  of  grain  in  New  York  is  regulated  by  the  price  in 
London  and  is  not  affected  by  currency  fluctuations,  Mr. 
Gould  argued  that  if  it  were  possible  to  raise  the  premium  on 
gold  from  thirty  to  forty  cents  at  harvest-time,  the  farmers' 
grain  would  be  worth  $1.40  instead  of  $1.30,  and  as  a  conse- 
quence the  farmer  woxild  hasten  to  send  all  his  crop  to  New 
York  for  export,  over  the  Erie  Railway,  which  was  sorely  in 
need  of  freights.  With  the  assistance  of  another  gentleman, 
Mr.  Goitld  calcidated  the  exact  premium  at  which  the  Western 
farmer  would  consent  to  dispose  of  his  grain,  and  thus  dis- 
tance the  three  hundred  sail  which  were  hastening  from  the 
Danube  to  supply  the  English  market.  Gold,  which  was  then 
heavy  at  34,  must  be  raised  to  45. 

This  clever  idea,  like  all  the  other  ideas  of  these  gentlemen 
of  Erie,  seems  to  have  had  the  single  fault  of  requiring  that 
some  one,  somewhere,  should  be  swindled.  The  scheme  was 
probably  feasible  ;  but  sooner  oi-  later  the  reaction  from  such 
an  artificial  stimulant  must  have  come,  and  whenever  it  came 
some  one  must  suffer.  Nevertheless,  Mr.  Gould  probably 
argued  that  so  long  as  the  farmer  got  his  money,  the  Erie  Rail- 
way its  freights,  and  he  himself  his  small  profits  on  the  gold 
he  bought,  it  was  of  little  consequence  who  else  might  be 
injured  ;  and,  indeed,  by  the  time  the  reaction  came,  and  gold 
was  ready  to  fall  as  he  expected,  Mr.  Gould  would  probably 


114  THK   NEW   YORK   GOLD   CONSl'IRxVCY. 

have  been  ready  to  assist  the  process  by  speculative  sales  in 
order  to  enable  the  Westeni  farmer  to  buy  his  spring  goods 
cheap  as  he  had  sold  his  autumn  crops  dear.  He  himself  was 
equally  ready  to  buy  gold  cheap  and  sell  it  dear  on  his  private 
account ;  and  as  he  proposed  to  bleed  New  York  merchants 
for  the  benefit  of  the  Western  farmer,  so  he  was  willing  to 
bleed  Broad  Street  for  his  own.  The  patriotic  object  was, 
however,  the  one  which  for  obvious  reasons  Mr.  Gould  pre- 
ferred to  put  forward  most  prominently,  and  on  the  strength 
of  which  he  hoped  to  rest  his  ambitious  structure  of  intrigue. 

In  the  operation  of  raising  the  price  of  gold  from  133  to 
145,  there  was  no  gi-eat  difficulty  to  men  who  controlled  the 
resources  of  the  Erie  Railway.  Credit  alone  was  needed,  and 
of  credit  Mr.  Gould  had  an  unlimited  supply.  The  only 
serious  danger  lay  in  the  possible  action  of  the  national  gov- 
ernment, which  had  not  taken  the  same  philanthropic  view 
of  the  public  good  as  was  peculiar  to  the  managers  of  Erie. 
Secretary  Boutwell,  who  should  have  assisted  Mr.  Gould  iu 
"  bulling "  gold,  was  gravely  suspected  of  being  a  bear,  and 
of  wishing  to  depress  the  premiums  to  nothing.  If  he  were 
determined  to  stand  in  Mr.  Gould's  path,  it  was  useless  even 
for  the  combined  forces  of  Erie  and  Tammany  tb  jostle 
against  him ;  and  it  was  therefore  essential  that  Mr.  Gould 
should  control  the  government  itself,  whether  by  fair  means 
or  foul,  by  persuasion  or  by  purchase.  He  undertook  the 
task ;  and  now  that  his  proceedings  in  both  directions  have 
been  thoroughly  drawn  into  light,  it  is  well  worth  while  for 
the  public  to  see  how  dramatic  and  how  artistically  admirable 
a  conspiracy  in  real  life  may  be,  when  slowly  elaborated  from 
the  subtle  mind  of  a  clever  intriguer,  and  carried  into  execu- 
tion by  a  band  of  imshrinking  scoundrels. 

The  first  requisite  for  Mr.  Gould's  purpose  was  some  channel 
of  direct  communication  with  the  President ;  and  here  he  was 
peculiarly  favored  by  chance.  Mr.  Abel  llathbone  Corbin,  for- 
merly lawyer,  editor,  speculator,  lobby-agent,  familiar,  as  lie 
claims,  with  everything,  had  succeeded,  during  his  varied 
career,  iu  accumulating  from  one  or  another  of  his  hazardous 


THE  NEW  YORK  GOLD  CONSPIRACY.       115 

pursuits  a  comfortable  fortune,  and  he  had  crowned  his  siic- 
cess,  at  the  age  of  sixty-scvon  or  thereabouts,  by  contracting 
a  marriage  with  General  Grant's  sister,  precisely  at  the  mo- 
ment when  General  Grant  was  on  the  point  of  reaching  the 
highest  eminence  possible  to  an  American  citizen.  To  say 
that  Mr.  Corbin's  moral  dignity  had  passed  absolutely  pure 
through  the  somewhat  tainted  atmosphere  in  which  his  life 
liad  been  spent,  would  be  flattering  him  too  highly ;  but  at 
least  he  was  now  no  longer  engaged  in  any  active  occujjation, 
and  he  lived  quietly  in  New  York,  watching  the  course  of  pub- 
lic affairs,  and  remarkable  for  an  eminent  respectability  which 
became  the  President's  brother-in-law.  Mr.  Gould  enjoyed  a 
slight  acquaintance  with  Mr.  Corbin,  and  he  proceeded  to 
improve  it.  He  assumed,  and  he  asserts  that  he  really  felt,  a 
respect  for  Mr.  Corbin's  shrewdness  and  sagacity.  It  is  amus- 
ing to  obsei've  that  Mi*.  Corbin  claims  to  have  first  impi-essed 
the  famous  crop  theory  on  Mr.  Gould's  mind ;  while  Mr. 
Gould  testifies  that  he  himself  indoctrinated  Mr.  Corbin  with 
this  idea,  which  became  a  sort  of  monomania  with  the  Presi- 
dent's brother-in-law,  who  soon  began  to  preach  it  to  the 
President  himself.  On  the  15th  of  June,  1869,  the  Presi- 
dent came  to  New  York,  and  was  there  the  guest  of  Mr. 
Corbin,  who  urged  Mr.  Gould  to  call  and  pay  his  respects  to 
the  Chief  Magistrate.  Mr.  Gould  had  probably  aimed  at 
Ijrecisely  this  result.  He  called  ;  and  the  President  of  the 
United  States  not  only  listened  to  the  president  of  Erie,  but 
accepted  an  invitation  to  Mr.  Fisk's  theatre,  sat  in  Mr.  Fisk's 
private  box,  and  the  next  evening  became  the  guest  of  these 
two  gentlemen  on  their  magnificent  Newport  steamer,  while 
Mr.  Fisk,  arrayed,  as  the  newspapers  reported,  "  in  a  blue 
uniform,  with  a  broad  gilt  cap-band,  three  silver  stai's  on  his 
coat-sleeve,  lavender  gloves,  and  a  diamond  breast-pin  as  large 
as  a  cheiT}',  stood  at  the  gangway,  surrounded  by  his  aids, 
bestarred  and  bestriped  like  himself,"  and  welcomed  his  dis- 
tinguished friend. 

It  had  been  already  airanged  that  the  President  should  on 
this  occasion  be  sounded  in  regard  to  his  financial  policy  ;  and 


116       THE  NEW  YORK  GOLD  CONSPIRACY. 

when  the  selected  guests  —  among  whom  were  Mr.  Gould,  Mr. 
Fisk,  and  others  —  sat  down  at  nhie  o'clock  to  supper,  the 
conversation  was  directed  to  the  subject  of  finance.  "  Some 
one,"  says  Mr.  Gould,  "  asked  the  President  what  his  view 
was."  The  "  some  one  "  in  question  was,  of  course,  Mr.  Fisk, 
who  alone  had  the  impudence  to  put  such  an  inquiry.  The 
President  bhuitly  replied,  that  there  was  a  certain  amount  of 
fictitiousness  about  the  prosperity  of  the  country,  and  that  the 
bubble  might  as  well  be  tapped  in  one  way  as  another.  The 
remark  was  fatal  to  Mr.  Gould's  plans,  and  he  felt  it,  in  his 
own  words,  as  a  wet  blanket. 

Meanwhile  the  post  of  assistant-treasurer  at  New  York  had 
become  vacant,  and  it  was  a  matter  of  interest  to  Mr.  Gould 
that  some  person  friendly  to  himself  should  occupy  this  posi- 
tion, which,  in  its  relations  to  the  public,  is  second  in  impor- 
tance only  to  the  secretaryship  of  the  treasury  itself.  Mr. 
Gould  consulted  Mr.  Corbin,  and  Mr.  Corbin  suggested  the 
name  of  General  Butterfield,  —  a  former  officer  in  the  volun- 
teer army.  The  appointment  was  not  a  wise  one  ;  nor  does  it 
appear  in  evidence  by  what  means  Mr.  Corbin  succeeded  iu 
bringing  it  about.  There  is  a  suggestion  that  he  used  Mi*. 
A.  T.  Stewart,  the  wealthy  importer,  as  his  instrument  for 
the  purpose  ;  but  whatever  the.  influence  may  have  been,  Mr. 
Corbin  appears  to  have  set  it  in  action,  and  General  Butter- 
field  entered  upon  his  duties  towards  the  1st  of  July. 

The  elaborate  preparations  thus  made  show  that  some 
largo  scheme  was  never  absent  from  Mr.  Gould's  mind,  al- 
though between  the  months  of  May  and  Augvist  he  made  no 
attempt  to  act  upon  the  markets.  But  between  the  20th  of 
August  and  the  1st  of  Septeml)er,  in  company  with  Messrs. 
Woodward  and  Kimber,  two  large  specidators,  he  made  what 
is  known  as  a  pool,  or  combination,  to  raise  the  premium  on 
gold,  and  some  ten  or  fifteen  millions  were  bought,  but  with 
very  little  effect  on  the  price.  The  tendency  of  the  market 
was  downwards,  and  it  was  not  easily  counteracted.  Perhaps 
under  ordinary  circumstances  he  might  have  now  abandoned 
his  project ;  but  an  incident  suddenly  occurred  which  seems 
to  have  dmwn  him  headlong  into  the  boldest  operations. 


THE  NEW  YORK  GOLD  CONSPIRACY.       117 

Whether  the  appointment  of  General  Butterfield  had  any 
share  in  strengthening  Mr.  Gould's  faith  in  Mr.  Corbin's  se- 
cret powers  does  not  appear  in  evidence,  though  it  may  readily 
be  assumed  as  probable.  At  all  events,  an  event  now  took 
place  which  would  have  seemed  to  authorize  an  unlimited  faith 
in  Mr.  Corbin,  as  well  as  to  justify  the  implicit  belief  of  an 
Erie  treasurer  in  the  corruptibility  of  all  mankind.  The  un- 
suspicious President  again  passed  through  New  York,  and 
came  to  breakfast  at  Mr.  Corbin's  house  on  the  2d  of  Sep- 
tember. He  saw  no  one  but  Mr.  Corbin  while  there,  and  the 
same  evening  at  ten  o'clock  departed  for  Saratoga.  Mr.  Gould 
declares,  however,  that  he  was  told  by  Mr.  Corbin  that  the 
President,  in  discussing  the  financial  situation,  had  shown 
himself  a  convert  to  the  Erie  theory  about  marketing  the 
crops,  and  had  "  stopped  in  the  middle  of  a  conversation  in 
which  he  had  expressed  his  views,  and  written  a  letter"  to 
Secretary  Boutwell.  This  letter  is  not  produced  ;  but  Secre- 
tary Boutwell  testifies  as  follows  in  regard  to  it :  — 

"  I  think  on  the  evening  of  the  4th  of  September  I  received  a  let- 
ter from  the  President  dated  at  New  York,  as  I  recollect  it ;  I  am 
not  sure  where  it  is  dated.  I  have  not  seen  the  letter  since  the 
night  I  received  it.  I  think  it  is  now  in  my  residence  in  Groton. 
In  that  letter  he  expressed  an  opinion  that  it  was  undesirable  to 
force  down  the  price  of  gold.  He  spoke  of  the  importance  to  the 
West  of  being  able  to  move  their  crops.  His  idea  was  that  if  gold 
should  fall,  the  West  would  suffer,  and  the  movement  of  the  crops 
would  be  retarded.     The  impression  made  on  my  mind  by  the  letter 

was  that  he  liad  rather  a  strong  opinion  to  that  effect Upon 

the  receipt  of  the  President's  letter  on  the  evening  of  the  4th  of  Sep- 
tember, I  telegraphed  to  Judge  Ricliardson  [Assistant  Secretary  at 
Washington]  this  despatch :  '  Send  no  order  to  Butterfield  as  to 
sales  of  gold  until  you  hear  from  me.'  " 

Mr.  GoTild  had  therefore  succeeded  in  reversing  the  policy 
of  the  national  government ;  but  this  was  not  all.  He  knew 
what  the  government  would  do  before  any  oflScer  of  the  gov- 
ernment knew  it.  Mr.  Gould  was  at  Corbin's  house  on  the  2d 
of  September  ;  and  although  the  evidence  of  both  these  gen- 
tlemen is  very  confused  on  this  point,  the  inference  is  inevita- 


118       THE  NEW  YORK  GOLD  CONSPIRACY. 

ble  that  Gould  saw  Corbin  privately,  unknown  to  the  Presi- 
dent, within  an  hour  or  two  after  this  letter  to  Mr.  Boutwell 
Avas  written,  and  that  it  was  at  this  interview,  while  the  Pres- 
ident was  still  in  the  house,  that  Mr.  Corbin  gave  him  the 
information  about  the  letter ;  perhaps  showed  him  the  letter 
itself.  Then  followed  a  transaction  worthy  of  the  French 
stage.     Mr.  Corbin's  evidence  gives  his  own  account  of  it  :  — 

"  On  the  2d  of  September  (referring  to  memoranda)  Mr.  Gould 

offered  to  let  mo  have  some  of  the  gold  he  then  possessed 

He  spoke  to  me  as  he  had  repeatedly  done  before,  about  taking  a 
certain  amount  of  gold  owned  by  him.  I  finally  told  Mr.  Gould 
that  for  the  sake  of  a  lady,  my  wife,  I  would  accept  of  $  500,000  of 
gold  for  her  benefit,  as  I  shared  his  confidence  that  gold  would  rise. 
....  He  afterwards  insisted  that  I  should  take  a  million  more,  and 
I  did  so  on  the  same  conditions  for  my  wife.  He  then  sent  me  this 
paper." 

The  paper  in  question  is  as  follows  :  — 

"  Smith,  Gould,  Martin,  &  Co.,  Bankers, 

11  Broad  Street,  New  York,  September  2, 186a 
"  Mr. 

"Dear  Sir:  we  have  bought  for  your  account  and  risk  — 
500,000,  gold,  132,  R. 
1,000,000,  gol.l,  1331,  R. 
which  we  will  carry  on  demand  with  the  right  to  use. 

'•  Smith,  Gould,  Martin,  &  Co." 

This  memorandum  meant  that  for  every  rise  of  one  per  cent 
in  the  price  of  gold  Mr.  Corbin  was  to  receive  ^3,000,  and 
his  name  nowhere  to  appear.  If  the  inference  is  correct  that 
Gould  had  seen  Corbin  in  the  morning  and  had  learned  from 
him  what  the  President  had  written,  it  is  clear  that  lie  must 
have  made  his  bargain  on  the  spot,  and  then  going  directly  to 
the  city,  he  must  in  one  breath  have  ordered  this  memoran- 
dum to  be  made  out  and  large  quantities  of  gold  to  be  pur- 
chased, before  the  President  had  allowed  the  letter  to  leave 
Mr.  Corbin's  house. 

No  time  was  lost.  On  this  same  afternoon,  Mr.  Gould's 
brokers  bought  large  amounts  in  gold.  One  testifies  to  buy- 
ing ^  1,315,000  at  134|.     On  the  3d  the  premium  was  forced 


THE  NEW  YORK  GOLD  CONSPIRACY.        119 

lip  to  3G  ;  on  the  4th,  when  Mr.  Bontwell  received  his  letter, 
it  had  risen  to  37.  Here,  however,  Mr.  Gould  seems  to  have 
met  a  check,  and  he  describes  his  own  position  in  nervous 
Americanisms  as  follows  :  — 

"  I  did  not  want  to  buy  so  much  gold.  In  the  spring  I  put  gold 
up  from  32  to  38  and  40,  with  only  about  seven  niilHons.  But  all 
these  fellows  went  in  and  sold  short,  so  that  in  order  to  keep  it  up 
I  had  to  buy,  or  else  to  back  down  and  show  the  white  feather. 
They  would  sell  it  to  you  all  the  time.  I  never  intended  to  buy 
more  than  four  or  five  millions  of  gold,  but  these  fellows  kept  pur- 
chasing it  on,  and  I  made  up  my  mind  that  I  would  put  it  up  to  40 

at  one  time We  went  into  it  as  a  commercial  transaction, 

and  did  not  intend  to  buy  such  an  amount  of  gold.  I  was  forced 
into  it  by  the  bears  selling  out.  They  were  bound  to  put  it  down. 
I  got  into  the  contest.     All  these  other  fellows  deserted  me  like  rats 

from  a  ship.     Kiraber  sold  out  and  got  short He  sold  out 

at  37.    He  got  short  of  it,  and  went  up  "(  or,  in  English,  he  failed). 

It  was  unfortunate  that  the  bears  would  not  consent  to  lie 
still  and  be  flayed,  but  this  was  imquestionably  the  fact.  They 
had  the  great  operators  for  once  at  a  disadvantage,  and  they 
were  bent  on  revenge.  Mr.  Gould's  position  was  very  hazard- 
ous. When  Mr.  Kimber  sold  out  at  37,  which  was  probably 
on  the  7th  of  September,  the  market  broke  ;  and  on  the  8th 
the  price  fell  back  to  35.  Nor  was  this  all.  At  the  same 
moment,  when  the  "  pool  "  was  ended  by  Mr.  Kimber's  deser- 
tion, Mr.  Corbin,  with  his  eminent  shrewdness  and  respecta- 
bility, told  Mr.  Gould  "  that  gold  had  gone  up  to  37,"  and 
that  he  "should  like  to  have  this  matter  realized,"  which  was 
equivalent  to  saying  that  he  wished  to  be  paid  something  on 
account.  This  was  on  the  6th  ;  and  Gould  was  obliged  this 
same  day  to  bring  him  a  check  for  £5,000,  drawn  to  the  order 
of  Jay  Gould,  and  indorsed  in  blank  by  him  with  a  touching 
regard  for  Mr.  Corbin's  modest  desire  not  to  have  his  name 
appear.  There  are  few  financiers  in  the  world  who  will  not 
agree  that  this  transaction  does  great  credit  to  Mr.  Corbin's 
sagacity.  It  indicates  at  least  that  he  was  acquainted  with 
tiie  men  he  dealt  with.  Undoubtedly  it  placed  Mr.  Gould  in 
a  difficult  position ;  but  as  Mr.  Gould  already  held  some  fifteen 


120       THE  NEW  YORK  COLD  CONSPIRACY. 

millions  of  gold  and  needed  Mr.  Corbin's  support,  he  preferred 
to  pay  ,£.5,000  outright  rather  than  allow  Corbin  to  throw  his 
gold  on  the  market.  Yet  the  fabric  of  Gould's  web  had  now 
been  so  seriously  injured  that,  for  a  whole  week,  from  the  8th 
to  the  15th  of  September,  he  was  at  a  loss  what  to  do,  unable 
to  advance  and  equally  unable  to  retreat  without  very  severe 
losses.  He  sat  at  his  desk  in  the  opera-house,  silent  as  usual, 
and  tearing  little  slips  of  paper  which  he  threw  on  the  floor 
in  his  abstraction,  while  he  revolved  new  combinations  in  his 
mind. 

Down  to  this  moment  Mr.  James  Fisk,  Jr.,  has  not  ap- 
peared in  the  affair.  Gould  ha4  not  taken  him  into  his  con- 
fidence ;  and  it  was  not  until  after  the  10th  of  September 
that  Gould  appears  to  have  decided  that  there  was  nothing 
else  to  be  done.  Fisk  was  not  a  safe  ally  in  so  delicate  an 
affair,  but  apparently  there  was  no  choice.  Gould  approached 
him  ;  and,  as  usual,  his  touch  was  like  magic.  Mr.  Fisk's 
evidence  begins  here,  and  may  be  believed  when  very  strongly 
corroborated  : 

"  Gold  having  settled  down  to  35,  and  I  not  having  cared  to  touch 
it,  he  was  a  little  sensitive  on  the  subject,  feeling  as  if  he  would 

rather  take  his  losses  without  saying  anything  about  it Oue 

day  lie  said  to  me,  '  Don't  you  think  gold  has  got  to  the  bottom  ? ' 
I  replied  that  I  did  not  see  the  profit  in  l)uying  gold  unless  you  have 
got  into  a  position  where  you  can  command  the  market.  Ho  then 
said  he  had  bought  quite  a  large  amount  of  gold,  and  I  judged  from 
his  oonv«;rsation  that  he  wanted  me  to  go  into  the  movement  and 
help  strengthen  the  market.  Upon  that  I  went  into  the  market 
and  bought  I  should  say  that  was  about  the  15th  or  16th  of  Sej)- 
tember.    I  bought  at  that  time  about  seven  or  eight  millions,  I  think." 

The  market  responded  slowly  to  these  enormous  purchases ; 
and  on  the  IGththe  clique  was  still  struggling  to  recover  its 
lost  gi'onnd. 

Meanwhile  Mr.  (Jould  ha<l  ])laced  another  million  and  a  half 
of  gold  to  the  accoimt  of  (Jeneral  Buttei-field,  and  notified  him 
of  the  purchase.  So  Mr.  Gould  swears  in  spite  of  General 
Buiterfield's  denial.  The  date  of  this  purchase  is  not  fixed. 
Through  Mr.  Corbin  a  notice  was  also  sent  by  Gould  about  the 


THE  NEW  YORK  GOLD  CONSPIRACY.       121 

middle  of  Septeniber  to  the  President's  private  secretary,  Gen- 
eral Porter,  informing  him  that  half  a  million  was  placed  to  his 
credit.  General  Porter  instantly  wrote  to  repudiate  the  pur- 
chase, but  it  does  not  appear  that  Butterfield  took  any  notice 
of  Gould's  transaction  on  his  account.  On  the  10th  of  Sep- 
tember the  President  had  again  come  to  New  York,  where  he 
remained  his  brother-in-law's  guest  till  the  13th  ;  and  during 
this  visit  Mr.  Gould  appears  again  to  have  seen  him,  althoiigh 
Mr.  Corbin  avers  that  on  this  occasion  the  President  intimated 
his  wish  to  the  servant  that  this  should  be  the  last  time  Mr. 
Gould  obtained  admission.  "  Goidd  was  always  trying  to  get 
something  out  of  him,"  he  said  ;  and  if  he  had  known  how 
much  Mr.  Gould  had  succeeded  in  getting  out  of  him,  he 
would  have  admired  the  man's  genius,  even  while  shutting  the 
door  in  his  face.  On  the  morning  of  the  13th  the  President 
set  out  on  a  journey  to  the  little  town  of  Washington,  situ- 
ated among  the  mountains  of  Western  Pennsylvania,  where 
he  was  to  remain  a  few  days.  Mr.  Gould,  who  now  consulted 
Mr.  Corbin  regularly  every  morning  and  evening,  was  still 
extremely  nervous  in  regard  to  the  President's  policy  ;  and  as 
the  crisis  approached,  this  nervousness  led  him  into  the  fatal 
blunder  of  doing  too  much.  The  bribe  oft'ered  to  Porter  was 
a  grave  mistake,  but  a  greater  mistake  yet  was  made  by 
pressing  Mr.  Corbin's  influence  too  far.  He  induced  Mr. 
Corbin  to  write  an  official  article  for  the  New  York  press  on 
the  financial  policy  of  the  government,  an  article  afterwards 
inserted  in  the  New  York  Times  through  the  kind  offices  of 
Mr.  .James  McHemy,  and  he  also  persuaded  or  encouraged  Mr. 
Corbin  to  write  a  letter  directly  to  the  President  himself  This 
letter,  written  on  the  1 7th  under  the  influence  of  Gould's  anx- 
iety, was  instantly  sent  away  by  a  special  messenger  of  Fisk's  to 
reach  the  President  before  he  returned  to  the  capital.  The 
messenger  carried  also  a  letter  of  introduction  to  General 
Porter,  the  private  secretary,  in  order  to  secure  the  personal 
deliveiy  of  this  important  despatch. 

We  have  now  come  to  the  week  which  was  to  witness  the 
explosion  of  all  this  elaborately  constructed  mine.     On  Men- 
6 


122       THE  ^LW   YORK  GOLD  CONSPIRACY. 

day,  the  20th,  gold  again  rose.  Throughout  Tuesday  and 
Wednesday  Fisk  continued  to  purchase  without  limit,  and 
forced  the  price  up  to  40.  At  this  time  Goxdd's  firm  of  Smith, 
Goxdd,  &  Martin,  through  which  the  operation  wsis  conducted, 
had  purchased  some  $50,000,000;  and  yet  the  bears  Avent  on 
selling,  although  they  could  only  continiie  the  contest  by  bor- 
rowing Gould's  own  gold.  Gould,  on  the  other  hand,  could 
no  longer  sell  and  clear  himself,  for  the  very  reason  that  the 
sale  of  $50,000,000  woidd  have  broken  the  market  to  noth 
ing.  The  struggle  had  become  intense.  The  whole  countT^y 
wjis  looking  on  with  astonishment  at  the  battle  between  the 
bulls  and  the  bears.  All  business  was  deranged,  and  all  val- 
ues unsettled.  There  were  indications  of  a  panic  in  the  stock 
market ;  and  the  bears  in  their  emergency  were  vehemently 
pressing  the  government  to  intervene.  Gould  now  wrote  to 
Mr.  Boutwell  a  letter  so  inconceivably  impudent  that  it  indi- 
cates desperation  and  entire  loss  of  his  ordinary  coolness.  He 
began  :  — 

"Sir,  —  There  is  a  panic  in  Wall  Street,  engineered  by  a  bear 
combination.  Tlioy  have  withdrawn  currency  to  .such  an  extent 
that  it  is  impossible  to  do  ordinary  business.     The  Erie  Company 

requires  eight  hundred  thousand  dollars  to  disburse Much 

of  it  in  Ohio,  where  an  exciting  political  contest  is  going  on,  and 
where  we  have  about  ten  thousand  employed,  and  the  trouble  is 

charged   on   the   adffiinistration Cannot  you,  consistently, 

increase  your  line  of  currency  ?  " 

From  a  friend  such  a  letter  would  have  been  an  outrage ; 
but  from  a  member  of  the  Tammany  ruig,  the  principal  object 
of  detestation  to  the  government,  such  a  threat  or  bribe  — 
whichever  it  may  be  called  —  was  incredible.  Mr.  Gould  was, 
in  fact,  at  his  wits'  cud.  He  dreaded  a  panic,  and  he  felt  that 
it  could  no  longer  be  avoided. 

The  scene  now  shifts  for  a  moment  to  the  distant  town  of 
Washington,  among  the  hills  of  Western  Pennsylvania.  On 
the  morning  of  the  19th  of  September,  President  Grant  and 
his  j)rivate  secretary,  General  Porter,  were  playing  croquet  on 
the  grass,  when  Fisk'a  messenger,  after  twenty-foui*  hours  of 


THE  >JKW   VOI.'K   GOLD   CONSPIRACY.  123 

travel  by  rail  and  carriage,  arrived  at  the  house,  and  sent  in 
to  ask  for  General  Porter.  When  the  President's  game  was 
ended.  General  Porter  came,  received  his  own  letter  from 
Corbin,  and  called  the  President,  who  entered  the  room  and 
took  his  brother-in-law's  despatch.  He  then  left  the  room, 
and  after  some  ten  or  fifteen  minutes'  absence  returned.  The 
messenger,  tired  of  waiting,  then  asked,  "  Is  it  all  right  1 " 
"  All  right,"  replied  the  President ;  and  the  messenger  hast- 
ened to  the  nearest  telegraph  station,  and  sent  word  to  Fisk, 
"  Delivered  ;  all  right." 

The  messenger  was,  however,  altogether  mistaken.  Not 
only  was  all  not  right,  but  all  was  going  hopelessly  wrong. 
Tlie  President,  it  appears,  had  at  the  outset  siipposed  the  man 
to  be  an  ordinary  post-office  agent,  and  the  letter  an  ordinary 
letter  which  had  arrived  through  the  post-office.  Nor  was  it 
imtil  Porter  asked  some  curious  question  as  to  the  man,  that 
the  President  learned  of  his  having  been  sent  by  Corbin  merely 
to  carry  this  apparently  unimportant  letter  of  advice.  The 
President's  suspicions  wei'e  at  once  excited  ;  and  the  same  even- 
ing, at  his  rc(piest,  Mrs.  Grant  wrote  a  him-ied  note  to  Mrs.  Cor- 
bin, telling  her  how  gi-eatly  the  President  was  distressed  at  the 
rumor  that  Mr.  Corbin  was  speculating  in  Wall  Street,  and 
how  much  he  hoped  that  Mr.  Corbin  would  "instantly  discon- 
nect himself  with  anything  of  that  sort." 

This  letter,  subsequently  destroyed  or  said  to  have  been 
destroyed  by  Mrs.  Corbin,  arrived  in  New  York  on  the  morn- 
ing of  Wednesday  the  22d,  the  same  day  on  which  Gould  and 
his  enemies  the  bears  were  making  their  simultaneous  appeals 
to  Secretary  Boutwell.  Mrs.  Corbin  was  greatly  excited  and 
distressed  by  her  sister-in-law's  language.  She  at  once  carried 
the  letter  to  her  hnsband,  and  insisted  that  he  should  instantly 
abandon  his  interest  in  the  gold  speculation.  Mr.  Corbin, 
although  he  considered  the  scruples  of,  his  wife  and  her  family 
to  be  highly  absurd,  assented  to  her  wish ;  and  when  Mr. 
Gould  came  that  evening  as  usual,  with  $50,000,000  of  gold 
on  his  hands,  and  extreme  anxiety  on  his  mind,  Corbin  read 
to  him  two  letters  :  the  fiist,  written  by  Mrs.  Grant  to  Mrs. 


124       THK  NEW  YORK  GOLD  CONSPIRACY. 

Corbin ;  the  second,  written  by  Mr.  Corbin  to  President  Grant, 
assnring  him  that  he  had  not  a  dollar  of  interest  in  gold. 
The  assurance  of  this  second  letter  was,  at  any  sacrifice,  to  be 
made  good. 

Mr.  Corbin  proposed  that  Mr.  Gould  should  give  him  a 
check  for  £20,000,  and  take  his  $1,500,000  off  his  hands.  A 
proposition  more  calmly  impudent  than  this  can  scarcely  be 
imagined.  Gould  had  already  paid  Corbin  £5,000,  and  Corbin 
asked  for  £20,000  more,  at  the  very  moment  when  it  was 
clear  that  the  £5,000  he  had  received  had  been  given  him 
under  a  misunderstanding  of  his  sei-vices.  He  even  had  the 
impudence  to  represent  himself  as  doing  Gould  a  favor  by 
letting  him  have  a  million  and  a  half  more  gold  at  the  highest 
market  price,  at  a  time  when  Gould  had  fifty  millions  which 
it  was  clear  he  must  sell  or  be  ruined.  What  Gould  might, 
\mder  ordinary  circumstances,  have  replied,  may  be  imagined  ; 
but  at  this  moment  he  could  say  nothing.  Corbin  had  but  to 
show  this  note  to  a  single  broker  in  Wall  Street,  and  the 
whole  fabric  of  Gould's  speculation  would  have  fallen  to 
pieces.  Gould  asked  for  time  and  went  away.  He  consxalted 
no  one.  He  gave  Fisk  no  hint  of  what  had  happened.  The 
next  morning  he  returned  to  Corbin,  and  made  him  the  fol- 
lowing offer  :  — 

"'Mr.  Corbin,  I  cannot  give  you  anything  if  you  will  go  out 
If  yon  will  rema,in  in,  and  take  the  chances  of  the  luaiket,  I  will 
give  you  my  check  [for  £,  20,000J.'  '  And  then.'  says  Mr.  Corbin, 
'  I  did  what  I  think  it  would  have  troubled  almost  any  other  busi- 
ness man  to  con.«!ent  to  do,  —  refuse  one  hundred  thousand  dollars  on 
a  rising  market.  If  I  had  not  been  an  old  man  married  to  a  niicldlo- 
aged  woman,  I  should  have  done  it  (of  course  with  her  consent)  just 
as  sure  as  the  offer  was  made.  I  said,  '  Mr.  Gould,  my  wife  says 
•'  No  !  "     Ulysses  thmks  it  wrong,  and  that  it  ought  to  en<l.'     So  I 

gave  it  up lie  looked  at  me  with  an  air  of  severe  distrust,  as 

if  he  was  afraicl  of  treachery  in  the  camp.  He  remarked,  '  Mr.  Cor- 
bin, I  am  undone  if  that  letter  gets  out'  ....  He  stood  tliere  for  a 
litUe  while  looking  very  thoughtful,  exceedingly  thoiightful.  He 
then  left  and  went  into  Wall  Street,  ....  and  my  impnjssion  is 
that  lie  it  was,  and  not  the  government,  that  bioke  that  market'  " 


THE  NKW  YORK  GOLD  CONSPIRACY.       125 

Mr.  Corbin  was  right ;  throughout  all  these  transactions 
his  insight  into  Mr.  Gould's  character  was  marvellous. 

It  was  the  morning  of  Thursday,  the  3d  ;  Gould  and  Fisk 
went  to  Broad  Street  together,  but  as  usual  Gould  was  silent 
and  secret,  while  Fisk  was  noisy  and  communicative.  There 
was  now  a  complete  separation  in  their  movements.  Gould 
acted  entirely  through  his  own  firm  of  Smith,  Gould,  &,  Mar- 
tin, while  Fisk  operated  principally  through  his  old  partner, 
Beldeu.     One  of  Smith's  principal  brokers  testifies  :  — 

"  '  Fisk  never  could  do  business  with  Smith,  Gould,  &  Martin  very 
comfortably.  They  would  not  do  business  for  him.  It  was  a  very 
uncertain  thing  of  course  where  Fisk  might  be.  He  is  an  erratic 
sort  of  genius.  I  don't  think  anybody  would  want  to  follow  him 
very  long.  I  am  satisfied  that  Smith,  Gould,  &  Martin  controlled 
their  own  gold,  and  were  ready  to  do  as  they  pleased  with  it  with- 
out consulting  Fisk.  I  do  not  think  there  was  any  general  agree- 
ment  None  of  us  Avho  knew  him  cared  to  do  business  with 

him.  I  would  not  have  taken  an  order  from  him  nor  had  anything 
to  do  with  him.'  Beldon  was  considered  a  very  low  fellow.  '  I 
never  had  anything  to  do  Avith  him  or  his  party,'  said  one  broker 
employed  by  Gould.  '  They  were  men  I  had  a  perfect  detestation 
of;  they  were  no  company  for  me.  I  should  not  have  spoken  to 
them  at  all  under  any  ordinary  circumstances.'  Another  says, 
'  Beldeu  is  a  man  in  whom  I  never  had  any  confidence  in  any  way. 
For  months  before  that,  I  would  not  have  taken  him  for  a  gold 
transaction.'  " 

And  yet  Belden  bought  millions  upon  millions  of  gold.  He 
himself  says  he  had  bought  twenty  millions  by  this  Thursday 
evening,  and  this  without  capital  or  credit  except  that  of  his 
brokers.  Meanwhile  Gotild,  on  reaching  the  city,  had  at  once 
given  secret  orders  to  sell.  From  the  moment  he  left  Corbin, 
he  had  but  one  idea,  which  was  to  get  rid  of  his  gold  as  quietly 
as  possible.  "  I  purchased  merely  enough  to  make  believe  I 
was  a  bull,"  says  Gould.  This  double  process  continued  all 
that  afternoon.  Fisk's  wild  purchases  carried  the  price  up  to 
144,  and  the  panic  in  the  street  became  more  and  more  serious 
as  the  bears  realized  the  extremity  of  their  danger.  No  one 
can  tell   liow  nuich  gold  which  did  not  exist  they  had  con- 


]26        THE  NEW  YORK  GOLD  CONSPIRACY. 

tracted  to  deliver  or  pay  the  diffei'cnce  in  price.  One  of  the 
clique  brokers  sweai-s  that  on  this  Thursday  evening  the  street 
had  sold  the  clique  one  hundred  and  eighteen  millions  of  gold, 
and  every  vise  of  one  per  cent  on  this  sum  implied  a  loss  of 
more  than  £200,000  to  the  bears.  Naturally  the  teiTor  was 
extreme,  for  half  Broad  Street  and  thousands  of  speculators 
would  have  been  ruined  if  compelled  to  settle  gold  at  150 
which  they  had  sold  at  140.  It  need  scarcely  be  said  that  by 
this  time  nothing  more  was  hcai*d  in  regard  to  philanthropic 
theories  of  benefit  to  the  Western  farmer. 

Mr.  Gould's  feelings  can  easily  be  imagined.  He  knew  that 
Fisk's  reckless  management  would  bring  the  government  upon 
his  shoulders,  and  he  knew  that  iinless  he  could  sell  his  gold 
before  the  order  came  from  Washington  he  woxdd  be  a  ruined 
man.  He  knew,  too,  that  Fisk's  contracts  must  inevitably  be 
repudiated.  This  Thursday  evening  he  sat  at  his  desk  in  the 
Erie  offices  at  the  opera-house,  while  Fisk  and  Fisk's  brokers 
chattered  about  him. 

'•  I  was  tran.sacting  my  railway  business.  I  had  my  OAvn  view^s 
about  the  niaikot,  and  my  own  fisli  to  fry.  I  was  all  alone,  so  to 
.<;pcak,  in  what  I  did,  and  I  did  not  let  any  of  those  people  know 
exactly  how  I  stood.  I  got  no  ideas  from  anything  that  wa*;  said 
there.  I  had  been  selling  gold  from  .35  up  all  the  time,  and  I  did 
not  know  till  the  next  morning  that  there  would  probably  come  an 
order  about  twelve  o'clock  to  sell  gold." 

He  had  not  told  Fisk  a  word  in  regard  to  Corbin's  retreat, 
nor  his  own  orders  to  sell. 

When  the  next  day  came,  Gould  and  Fisk  went  together  to 
Broad  Street,  and  took  possession  of  the  private  back  office 
of  a  principal  broker,  "  without  asking  the  privilege  of  doing 
80,"  a.s  the  broker  observes  in  his  evidence.  The  first  news 
brought  to  Gould  was  a  disaster.  The  government  had  sent 
three  men  from  Washington  to  examine  the  bank  which  Gould 
owned,  and  the  bank  sent  word  to  Mr.  Gould  that  it  feared  to 
certify  for  him  as  usual,  and  was  itself  in  danger  of  a  panic, 
caused  by  the  presence  of  officers,  which  created  distnist  of  the 
bank.     It   barely   managed   to  save  itnAf.     Gould   took   tho 


THE  KEW  YORK  GOLD  CONSPIRACY.       127 

information  silently,  and  his  firm  redoubled  sales  of  gold. 
His  partner,  Smith,  gave  the  orders  to  one  broker  after  an- 
other, —  "  Sell  ten  millions  !  "  "  The  order  was  given  as  quick 
as  a  flash,  and  away  he  went,"  says  one  of  these  men.  "  I 
sold  only  eight  millions."  "  Sell,  sell,  sell !  do  nothing  but 
sell !  — ■  only  don't  sell  to  Fisk's  brokers,"  were  the  orders 
which  Smith  himself  acknowledges.  In  the  gold-room  Fisk's 
brokers  were  shouting  their  rising  bids,  and  the  packed  crowd 
grew  frantic  with  terror  and  rage  as  each  successive  rise  showed 
their  increasing  losses.  The  wide  streets  outside  were  thronged 
with  excited  people  ;  the  telegraph  offices  were  overwhelmed 
with  messages  ordering  sales  or  purchases  of  gold  or  stocks ; 
and  the  whole  nation  was  watching  eagerly  to  see  what  the 
result  of  this  convulsion  was  to  be.  All  trade  was  stopped, 
and  even  the  President  felt  that  it  was  time  to  raise  his  hand. 
No  one  who  hsvs  not  seen  the  New  York  gold-room  can  under- 
stand the  spectacle  it  presented ;  now  a  perfect  pandemonium, 
now  silent  as  the  grave.  F'isk,  in  his  dark  back  office  across 
the  street,  with  his  coat  off,  swaggered  up  and  down,  "  a  big 
cane  in  his  hand,"  and  called  himself  the  Napoleon  of  Wall 
Street.  He  really  believed  that  he  directed  the  movement, 
and  while  the  street  outside  imagined  that  he  and  Gould  were 
one  family,  and  that  his  purchases  were  made  for  the  clique, 
Gould  was  silently  flinging  away  his  gold  at  any  price  he  could 
get  for  it. 

Whether  Fisk  really  expected  to  carry  out  his  contract,  and 
force  the  bears  to  settle,  or  not,  is  doubtful ;  but  the  evidence 
seems  to  show  that  he  was  in  earnest,  and  felt  sure  of  success. 
iris  orders  were  unlimited.  "Put  it  up  to  L50,"  was  one 
which  he  sent  to  the  gold-room.  Gold  rose  to  150.  At  length 
the  bid  was  made  —  "  160  for  any  part  of  five  millions,"  and 
no  one  any  longer  dared  take  it.  "  161  for  five  millions,"  — 
"  162  for  five  millions."  No  answer  was  made,  and  the  offer 
was  repeated,  —  "  162  for  any  part  of  five  millions."  A  voice 
replied,  "Sold  one  million  at  62."  The  bubble  suddenly 
burst,  and  within  fifteen  minutes,  amid  an  excitement  without 
parallel  even  in  the  wildest  excitements  of  the  war,  the  clique 


128       THE  NEW  YORK  GOLD  CONSPIRACY. 

brokers  were  literally  swept  away,  and  left  struggling  by  them- 
selves, bidding  still  IGO  for  gold  in  millions  which  no  one 
would  any  longer  take  their  word  for ;  while  the  premium  sank 
rapidly  to  135.  A  moment  later  the  telegraph  brought  from 
Washington  the  government  order  to  sell,  and  the  result  was 
no  longer  possible  to  dispute.  Mr.  Fisk  had  gone  too  far,  while 
Mr.  Gould  had  secretly  weakened  the  ground  under  his  feet. 

Gould,  however,  was  saved.  His  fifty  millions  were  sold  ; 
and  although  no  one  yet  knows  what  his  gains  or  losses  may 
have  been,  his  firm  was  now  able  to  meet  its  contracts  and 
pi'otect  its  brokers.  Fisk  was  in  a  very  different  situation. 
So  soon  as  it  became  evident  that  his  brokers  would  be  unable 
to  cari'y  out  their  contracts,  every  one  who  had  sold  gold  to 
them  turned  in  wrath  to  Fisk's  office.  Fortunately  for  him 
it  was  protected  by  armed  men  whom  he  had  brought  with 
him  from  his  castle  of  Erie ;  but  nevertheless  the  excitement 
was  so  great  that  both  Mr.  Fisk  and  Mr.  Gould  thought  it  best 
to  retire  as  rapidly  as  possible  by  a  back  entrance  leading  into 
another  street,  and  to  seek  the  protection  of  the  opera-house. 
There  nothing  but  an  army  could  disturb  them ;  no  civil  man- 
date was  likely  to  be  served  without  their  permission  within 
these  walls,  and  few  men  would  care  to  face  Fisk's  ruffians  in 
order  to  force  an  entrance. 

The  subsequent  winding  up  of  this  famous  conspiracy  may 
be  stated  in  few  words.  But  no  account  could  possibly  be 
complete  which  failed  to  reproduce  in  full  the  story  of  Mr. 
Fisk's  last  interview  with  Mr.  Corbin,  as  told  by  Fisk  himself. 

"  I  went  down  to  the  neighborhood  of  Wall  Street.  Friday  morn- 
ing, and  the  liistory  of  that  morning  you  know.  When  I  got  back 
to  our  office,  you  can  imagine  I  was  in  no  enviable  state  of  mind, 
and  the  moment  I  got  up  street  that  afternoon  I  started  riglit  round 
to  old  Corbin's  to  rake  him  out.  I  went  into  the  room,  and  sent 
word  that  Mr.  Fisk  wanted  to  see  him  in  the  dining-room.  I  was 
too  mad  to  say  anything  civil,  and  when  ho  canio  into  the  room, 
said  I,  '  You  damned  old  scoundrel,  do  you  know  what  you  have 
done  here,  "ou  and  your  people?'  lie  began  to  wring  his  hands, 
and,  '  Oh  !  '  ho  says,  '  this  is  a  horrible  position.  Are  you  ruined?  ' 
I  said  I  did  n't  know  whether  I  was  or  not;  and  I  asked  him  again 


THE  NEW  YORK  GOLD  CONSPIRACY.       129 

if  he  knew  what  had  happened  ?  He  had  been  crying,  and  said  he 
liad  just  heard ;  that  he  had  been  sure  everything  was  all  riglit ; 
but  that  something  had  occurred  entirely  different  from  what  he 
had  anticipated.  Said  I,  '  That  don't  amount  to  anything  ;  we  know 
that  gold  ought  not  to  be  at  31,  and  that  it  would  not  be  but  for  such 
perfonnances  as  you  have  had  this  last  week ;  you  know  damned 
well  it  would  not  if  you  had  not  failed.'  I  knew  that  somebody 
had  run  a  saw  right  into  us,  and  said  I,  '  This  whole  damned  thing 
has  turned  out  just  as  I  told  you  it  would.'  I  considered  the  whole 
party  a  pack  of  cowards,  and  I  expected  that  when  we  came  to 
clear  our  hands  they  would  sock  it  right  into  us.  I  said  to  him,  '  I 
don't  know  Avhether  you  have  lied  or  not,  and  I  don't  know  what 
ought  to  be  done  with  you.'  He  was  on  the  other  side  of  the  table, 
weeping  and  wailing,  and  I  was  gnashing  my  teeth.  '  Now,'  he 
says,  'you  must  quiet  yourself.'  I  told  him  I  did  n't  want  to  be 
quiet.  I  had  no  desire  to  ever  be  quiet  again,  and  probably  never 
should  be  quiet  again.  He  says,  '  But,  my  dear  sir,  you  will  lose 
your  reason.'  Says  I,  '  Speyers  [a  broker  employed  by  him  that 
day]  has  already  lost  his  reason ;  reason  has  gone  out  of  everybody 
but  me.'  I  continued,  'Now  what  are  you  going  to  do?  You  have 
got  us  into  this  thing,  and  what  are  you  going  to  do  to  get  out  of  it  ? ' 
He  says,  '  I  don't  know.  I  will  go  and  get  my  wife.'  I  said,  '  Get 
her  down  here ! '  The  soft  talk  was  all  over.  He  went  up  stairs 
and  they  returned,  tottling  into  the  room,  looking  older  than  Stephen 
Hopkins.  His  wife  and  he  both  looked  like  death.  He  was  tottling 
just  like  that.  [Illustrated  by  a  trembling  movement  of  his  body.] 
I  have  never  seen  him  from  that  day  to  this." 

This  is  sworn  evidence  before  a  committee  of  Congress ;  and 
its  humor  is  perhaps  the  more  conspicuous,  because  there  is 
every  reason  to  believe  that  there  is  not  a  word  of  truth  in 
the  story  from  beginning  to  end.  No  such  interview  ever 
occurred,  except  in  the  unconfined  apartments  of  Mr.  Fisk's 
imagination.  His  own  previous  statements  make  it  certain 
that  he  was  not  at  Corbin's  house  at  all  that  day,  and 
that  Corbin  did  come  to  the  Erie  offices  that  evening,  and 
again  the  next  morning.  Corbin  himself  denies  the  truth 
of  the  account  without  limitation  ;  and  adds,  that  when  he 
entered  the  Erie  offices  the  next  morning  Fisk  was  there. 
"  I  asked  him  how  Mr.  Could  felt  after  the  great  calamity  of 
the  day  before."  He  remarked,  "  0,  he  has  no  courage  at  all. 
6*  I 


130       THE  NEW  YORK  GOLD  CONSPIRACY. 

He  has  sunk  right  down.  There  is  nothing  left  of  him  hut  a 
heap  of  clothes  and  a  pair  of  eyes."  The  internal  evidence  of 
truth  iu  this  anecdote  would  support  Mr.  Corbin  against  the 
world.* 

In  regard  to  Mr.  Gould,  Fisk's  graphic  description  was  prob- 
ably again  inaccurate.  Undoubtedly  the  noise  and  scandal 
of  the  moment  were  extremely  unpleasant  to  this  silent  and 
impenetrable  intriguer.  The  city  was  in  a  ferment,  and  the 
whole  country  pointing  at  him  with  wrath.  The  machinery 
of  the  gold  exchange  had  broken  down,  and  he  alone  could 
extricate  the  business  community  from  the  pressing  danger 
of  a  general  panic.  He  had  saved  himself,  it  is  true ;  but  in 
a  manner  which  could  not  have  been  to  his  taste.     Yet  his 

*  Mr.  Fisk  to  the  Editor  of  the  Sun:  — 

Erie  Railway  Company,  Comptroller's  Office, 

New  York,  October  4, 1869. 

To  THE  EniTOK  OF  THE  SUN. 

Dear  Sir, — . .  .  .  Mr.  Corbin  has  constantly  associated  with  me;  .  ...  he 
upent  more  than  an  hour  with  me  in  the  Erie  Railway  Office  on  the  afternoon  of 

Saturday^  September  25<A,  the  day  after  the  gold  panic I  enclose  you  a 

few  affidavits  which  will  give  you  further  information  concerning  this  matter. 
I  remain  your  obedient  servant, 

James  Fisk,  Jr. 
Affidavit  of  Charles  W.  Pollard. 
"  State  of  New  York,  City  and  County  of  New  York,  ss. 

"  C.  W.  Pollard,  being  duly  swom,  says:  '  I  have  frequently  been  the  bearer 
of  messages  between  Mr.  James  Fisk,  Jr  ,  and  Mr.  Abel  R.  Corbin,  brother- 
in-law  of  President  Grant Mr.  Corbin  called  on  me  at  the  Erie  build- 
ing on  Thursday,  23d  September,  1869,  telling  me  he  came  to  see  how  Messrs. 

Fisk  and  Gould  were  getting  along He  called  again  on  Friday,  the 

following  day,  at  about  noon;  appeared  to  be  greatly  e.xcited  and  said  he 
feared  we  should  lose  a  great  deal  of  money.  The  following  morning,  Saturday, 
September  25,  Mr.  Fisk  told  me  to  fake  his  carriage  and  call  upon  Mr.  Corbin 
and  say  to  him  that  he  and  Mr.  Gould  would  like  to  see  him  (Corbin)  at  their 
office.  I  called  and  saw  Mr.  Corbin.  He  remarked  upon  greeting  me :  "  How 
does  Mr.  Fisk  bear  his  losses?  "  and  added.  "  It  is  terrible  fw  us."  He  then 
asked  me  to  bring  Mr.  Fifk  up  to  his  house  immediately,  as  he  was  indisposed, 
nnd  did  not  feel  able  to  go  down  to  his  (Fisk's)  office  I  went  after  Mr.  Fisk, 
who  returned  immediately  with  me  to  Mr.  Corbin's  residence,  but  shortly 
after  came  out  with  Mr.  Corbin,  who  accompanied  him  to  Mr.  Fisk's  office, 
■where  he  was  closeted  with  him  and  Mr.  Gould  for  about  two  hours '  " 

There  are  obvious  inconsistencies  among  these  different  accounts,  which  it 
is  useless  to  attempt  to  explain.  The  fact  of  Saturday's  interview  appears, 
however,  to  be  beyond  ditpnte. 


THE  NEW  YORK  GOLD  CONSPIRACY.       131 

course  from  this  point  must  have  been  ahnost  self-evident  to 
liis  mind,  and  there  is  no  reason  to  suppose  that  he  hesitated. 
His  own  contracts  were  all  fulfilled.  Fisk's  contracts,  all 
except  one,  in  respect  to  which  the  broker  was  able  to  compel 
a  settlement,  were  repudiated.  Gould  probably  suggested  to 
Fisk  that  it  wjis  better  to  let  Belden  fail,  and  to  settle  a  hand- 
some fortune  on  him,  than  to  sacrifice  something  more  than 
£  1,000,000  in  sustaining  him.  Fisk  therefore  threw  Belden 
over,  and  swore  that  he  had  acted  only  under  Belden's  order ; 
in  support  of  which  statement  he  produced  a  paper  to  the 

following  eftect :  — 

"  September  24. 

"  Dkar  Sir,  — I  hereby  authorize  you  to  order  the  purchase  and 
sale  of  gold  on  my  a<jcouiit  during  this  day  to  the  extent  you  may 
deem  advisable,  and  to  report  the  same  to  me  as  early  as  possible. 
It  is  to  be  understood  that  the  profits  of  such  order  are  to  belong 
entirely  to  me,  and  1  will,  of  coui-se,  bear  any  losses  resulting. 

"  Yours, 

"  William  Belden. 
**  James  Fisk,  .Ir." 

This  document  was  not  produced  in  the  original,  and  cer- 
tainly never  existed.  Belden  himself  could  not  be  induced  to 
acknowledge  the  order ;  and  no  one  would  have  believed  him 
if  he  had  done  so.  Meanwhile  the  matter  is  before  the  na- 
tional courts,  and  Fisk  may  probably  be  held  to  his  contracts  : 
but  it  will  be  far  more  difficult  to  execute  judgment  upon  him, 
or  to  discover  his  assets. 

One  of  the  fii-st  acts  of  the  Erie  gentlemen  after  the  crisis? 
was  to  summon  their  lawyei-s,  and  set  in  action  their  judicial 
powers.  The  object  was  to  prevent  the  panic-stricken  brokers 
from  using  legal  process  to  force  settlements,  and  so  render 
the  entanglement  inextricable.  Messre.  Field  and  Shearman 
came,  and  instantly  prepared  a  considerable  number  of  injunc- 
tions, which  were  sent  to  their  judges,  signed  at  once,  and  im- 
mediately served,  Gould  then  was  able  to  dictate  the  terms 
of  settlement ;  and  after  a  week  of  complete  paralysis.  Broad 
Street  began  at  last  to  show  signs  of  retuniing  life.  As  a 
legal  curiosity,  one  of  these  documents,  issued  three  months 


132       THE  NKW  YORK  GOLD  CONSPIRACY. 

after  the  crisis,   may  be  reproduced,  in  order  to   show  the 
powers  wielded  by  the  Erie  managers  :  ^ 

"  Supreme  Court. 
H.  N.  Smith,  Jay  Gould,  H.  H.  Martin,  y 

and  J.  B.  Bach,  PlaintifFy, 

.     ,  Iniunction 

aqain.it  ■  ,  -'       , 

_         ^  ,    .  T     ni  ^y  order. 

John  Bonner  and  Arthur  L.  Sewell,        I 

Defendants,  j 

"  It  appearing  satisfactorily  to  mo  by  the  complaint  duly  A-erifu'd 

by  the  plaintitis  that  sufficient  grounds  for  an  order  of  injunction 

exist,  I  do  hereby  order   and  enjoin  ....  That  the  defendants, 

John  Bonner  and  Arthur  L.  Sewell,  their  agents,  attorneys,  and 

servants,  refrain  from  pressing  their  pretended  claims  against  the 

plaintiffs,  or  either  of  them,  before  the  Arbitration  Committee  of  the 

New  York  Stock  Exchange,  or  from  tsiking  any  proceedings  thereon, 

or  in  relation  thereto,  except  in  this  action. 

"  George  G.  Barnard,  J.  S.  C. 
"New  York,  December  29,  1869." 

Mr,  Bonner  had  practically  been  robbed  with  violence  by 
Mr.  Gould,  and  instead  of  his  being  able  to  bring  the  robber 
into  court  as  the  criminal,  the  roblier  brought  him  into  court 
as  criminal,  and  the  judge  forbade  him  to  appear  in  any  other 
character.  Of  all  Mr.  Field's  distinguished  legal  reforms  and 
philanthropic  projects,  this  injunction  is  beyond  a  doubt  the 
most  brilliant  and  the  most  successful.* 

•  These  remarks  on  Mr.  Field's  professionnl  conduct  ns  comisel  of  the  Erie 
Railway  have  excited  a  somewhat  intempern'e  controversy,  and  Mr.  Field's 
partisans  in  the  press  have  made  against  tlie  authors  of  the  "  Cliaptors  of 
Erie"  a  charge  which  certainly  has  the  merit  of  even  exaggera'ed  nioles'y 
on  the  part  of  the  New  Yorlt  bench  and  bar,  namely,  that  these  wri  ers 
"have  indelicaely  interfered  in  a  matter  alien  to  ihem  in  everyway";  tlie 
administration  of  justice  in  New  Yorlt  being,  in  this  point  of  view,  a  matter 
in  which  Mr.  Field  and  the  Erie  Railway  are  alone  concerned.  Mr.  Field  him- 
self has  published  a  leHer  in  the  Westminster  Review  for  April,  1871,  in 
which,  after  the  general  assertion  that  the  passages  in  llie  "  New  York  Gold 
Conspiracy"  which  relate  to  him  "  cover  about  as  much  untruth  as  could  be 
crowded  into  so  many  lines,"  he  proceeds  to  make  the  following  corrections: 

First,  he  denies,  what  was  never  suggested,  that  he  was  in  any  way  a  party  to 
the  origin  or  progress  of  the  Gold  Conspiracy;  until  (secondly)  be  was  consulted 
on  the  28th  of  September;  when  (thirdly)  he  gave  an  opinion  as  to  the  powers 
of  the  members  of  the  Gold  and  Stock  Exchanges.  Fourthly,  he  denies  that 
he  lias  relations  of  any  sort  with  any  judge  in  New  York,  or  any  power  oyer 


THK  NEW  YORK  GOLD  CONSPIRACY.       133 

The  fate  of  the  conspirators  was  not  severe.  Mr.  Corbiu 
went  to  Washington,  where  he  was  snubbed  by  the  President, 
and  at  once  disappeared  from  public  view,  only  coming  to 
light  again  before  the  Congressional  Committee.  General 
IJutteriield,  whose  share  in  the  transaction  is  least  under- 
stood, WHS  permitted  to  resign  his  office  without  an  investiga- 
tion. Speculation  for  the  next  six  months  was  at  an  end. 
Every  person  involved  in  the  affair  seemed  to  have  lost  money, 
and  dozens  of  brokers  were  swept  from  the  street.  But  Mr. 
Jay  (Jould  and  Mr.  James  Fisk,  Jr.,  continued  to  reign  over 
Erie,  and  no  one  can  say  that  their  power  or  their  credit  was 
sensibly  diminished  by  a  shock  which  for  the  time  prostrated 
all  the  interests  of  the  country. 

Nevertheless  it  is  safe  to  predict  that  sooner  or  later  the 
last  traces  of  the  disturbing  influence  of  war  and  paper  money 
will  disappear  in  America,  as  they  have  sooner  or  later  disap- 
peared in  every  other  country  which  has  passed  through  the 
same  evils.  The  result  of  this  convulsion  itself  has  been  in 
the  main  good.    It  indicates  the  approaching  end  of  a  troubled 

these  judges,  other  than  such  as  English  counsel  have  in  respect  to  English 
judges.  Fifthl}',  lie  asserts  that  out  of  twenty-eight  injunctions  growing  out 
of  the  gold  transactions,  his  partners  obtained  only  ten.  and  only  one  of  these 
ten,  tlie  one  quoted  above,  from  Justice  Barnard.  Sixthly,  that  this  injunc- 
tion was  proper  to  be  sought  and  granted.  Seventhly,  that  Mr.  Bonner  was 
not  himself  the  person  who  had  been  "  robbed  with  violence,"  but  the  assignee 
of  the  parties. 

On  the  other  hand  it  does  not  appear  that  Mr.  Field  denies  that  the  injunc- 
tion as  quoted  is  genuine,  or  that  he  is  responsible  for  it,  or  that  it  did,  as  as- 
serted, shut  the  defendants  out  of  the  courts  as  well  as  out  of  the  Gold  Ex- 
change .\rbitration  Committee,  or  that  it  compelled  them  to  appear  only  as 
defendants  in  a  case  where  they  were  the  injured  parties. 

In  regard  to  the  power  whicli  Air.  Field,  whether  as  a  private  individual  or 
as  Erie  counsel,  has  exercised  over  the  New  York  bench,  his  modest  denial  is 
hardly  calculated  to  serve  as  a  final  answer.  And  in  regard  to  Mr.  Bonner, 
the  fact  of  iiis  being  principal  or  representative  scarcely  affects  the  character 
of  Mr.  Field's  injunction.  Finally,  so  far  as  the  text  is  concerned,  after  allow- 
ing full  weight  to  ail  Mr.  Field's  corrections,  the  public  can  decide  for  itself 
how  many  untruths  it  contains.  Tiie  subject  has,  however,  ceased  to  be  one 
of  consequence  even  to  Mr.  Field  since  the  subsequent  violent  controversy 
which  arose  in  March,  1871,  in  regard  to  other  points  of  Mr.  Field's  profes- 
sional conduct,  and  in  another  month  after  his  letter  was  written  he  would 
perhaps  have  thought  the  comments  of  the  Westminster  Review  so  compara- 
tively trifling  in  importance  as  not  to  deserve  his  attention. 


134       THE  NEW  YORK  GOLD  CONSPIRACY. 

time.  Messrs.  Gould  aiid  Fisk  will  at  last  be  obliged  to  yield 
to  the  force  of  moral  and  economical  laws.  The  Erie  Rail- 
way will  be  rescued,  and  its  history  will  perhaps  rival  that  of 
the  great  speculative  manias  of  the  last  century.  The  United 
States  will  restore  a  sound  basis  to  its  currency,  and  will  learn 
to  deal  with  the  political  reforms  it  requires.  Yet  though  the 
regular  process  of  development  may  be  depended  upon,  in  its 
ordinary  and  established  course,  to  purge  American  society  of 
the  worst  agents  of  an  exceptionally  corrupt  time,  there  is  in 
the  history  of  this  Erie  corporation  one  matter  in  regard  to 
which  modern  society  everywhere  is  directly  interested.  For 
the  first  time  since  the  creation  of  these  enormous  coi'porAte 
bodies,  one  of  them  has  shown  its  power  for  mischief,  and  has 
proved  itself  able  to  override  and  trample  on  law,  custom,  de- 
cency, and  every  restraint  known  to  society,  without  scruple, 
and  as  yet  without  check.  The  belief  is  common  in  America 
that  the  day  is  at  hand  when  corporations  far  greater  than  the 
Erie  —  swaying  power  such  as  has  never  in  the  world's  history 
been  trusted  in  the  hands  of  mere  private  citizens,  controlled 
by  single  men  like  Vanderbilt,  or  by  combinations  of  men 
like  Fisk,  Gould,  and  Lane,  after  having  created  a  system  of 
quiet  but  iiTcsistible  corruption  —  will  ultimately  succeed  in 
directing  government  itself.  Under  the  American  form  of 
societ}',  there  is  now  no  authority  capable  of  effective  resist- 
ance. The  national  govennnent,  in  order  to  deal  with  the  cor- 
porations, must  assume  powers  refused  to  it  by  its  fundamental 
law,  and  even  then  is  always  exposed  to  the  chance  of  forming 
an  absobite  central  government  which  sooner  or  later  is  likely 
to  fall  into  the  very  hands  it  is  struggling  to  escape,  and  thus 
destroy  the  limits  of  its  power  only  in  order  to  make  corrup- 
tion omnipotent.  Nor  is  this  danger  confined  to  America 
alone.  The  corporation  is  in  its  nature  a  threat  against  the 
popular  institutions  which  are  spreading  so  rapidly  over  the 
whole  world  Wherever  there  is  a  popular  and  limited  gov- 
enmient  this  difficulty  will  be  found  in  its  path,  and  unless 
some  satisfactory  solution  of  the  problem  can  be  reached, 
popular  institutions  may  yet  find  their  very  existence  endan- 


AN  ERIE  RAID.* 


HISTORY  scarcely  affords  a  parallel  to  the  rapid  develop- 
ment of  character  which  took  place  in  America  during 
the  five  years  of  the  late  civil  war.  At  its  close  the  ordinary 
results  of  long  internal  strife  were  conspicuous  only  by  their 
absence.  No  chronic  guerilla  warfare  was  sustained  in  th'e 
South,  and  in  the  North  no  unusual  license  or  increase  of 
crime  revealed  the  presence  of  a  million  of  men  unaccustomed 
to  habits  of  industry  and  inured  to  a  life  of  arms.  Yet  while 
these  superficial  indications  of  change  would  be  sought  in 
vain,  other  and  far  more  suggestive  phases  of  development 
cannot  but  force  themselves  on  the  attention  of  any  thought- 
ful observer.  The  most  noticeable  of  these  is  perhaps  to  be 
found  in  a  greatly  enlarged  grasp  of  enterprise  and  increased 
fjicility  of  combination.  The  great  operations  of  war,  the 
handling  of  large  masses  of  men,  the  influence  of  discipline, 
the  lavish  expenditure  of  unprecedented  sums  of  money,  the 
immense  financial  operations,  the  possibilities  of  effective  co- 
operation, were  lessons  not  likely  to  be  lost  on  men  quick  to 
receive  and  to  apply  all  new  ideas.  Those  keen  observers  who 
looked  for  strange  and  unexpected  phenomena  when  the  strug- 
gle in  the  field  was  over  have  indeed  witnessed  that  which 
must  have  surpassed  all  anticipation. 

If  the  five  years  that  succeeded  the  war  have  been  marked 
by  no  exceptional  criminal  activity,  they  have  witnessed  some 
of  the  most  remarkable  examples  of  organized  lawlessness, 

*  From  the  North  American  Review  for  April,  1871. 


l:>6  AN  ERIE  RAID. 

under  the  forms  of  law,  which  mankind  has  yet  had  an  oppor- 
tmiity  to  study.  If  individuals  have,  as  a  rule,  quietly  pur- 
sued their  peaceful  vocations,  the  same  cannot  be  said  of 
certain  single  men  at  the  head  of  vast  combinations  of  pri- 
vate wealth.  This  has  been  peculiarly  the  case  as  regards 
those  controlling  the  rapidly  developed  railroad  interests. 
These  modern  potentates  have  declared  war,  negotiated  peace, 
reduced  courts,  legislatures,  and  sovereign  States  to  an  un- 
qualified obedience  to  their  will,  disturbed  trade,  agitated  the 
currency,  imposed  taxes,  and,  boldly  setting  both  law  and 
public  opinion  at  defiance,  have  freely  exercised  many  other 
attributes  of  sovereignty.  Neither  have  the  means  at  disposal 
proved  at  all  inadequate  to  the  ends  in  view.  Single  men 
have  controlled  himdreds  of  miles  of  railway,  thousands  of 
men,  tens  of  millions  of  revenue,  and  hundreds  of  millions 
of  capital.  The  sti'ength  implied  in  all  this  they  wielded  in 
practical  independence  of  the  control  both  of  governments  and 
of  individuals  ;  much  as  petty  German  despots  might  have 
governed  their  little  principalities  a  century  or  two  ago.  Thus 
by  degrees  almost  the  whole  of  the  system  of  internal  com- 
munication through  the  northern  half  of  the  United  States 
has  practically  been  partitioned  out  among  a  few  individu- 
als, and,  as  proximity,  or  comj)etition  on  certain  debatable 
grounds,  —  the  Belgiums  of  the  system,  —  brought  the  inter- 
ests represented  by  these  men  into  conflict,  a  series  of  strug- 
gles have  ensued  replete  with  dramatic  episodes.  No  history 
of  the  present  time  will  be  complete  in  which  these  do  not 
occupy  much  space,  and  any  condensed  record  of  them  has, 
therefore,  much  more  than  a  passing  value.  Not  history  in 
itself,  it  contains  tlie  material  of  history  ;  yet  the  thread 
of  these  episodes  is  so  difficult  to  trace,  lying  concealed  in 
such  dull  volumes  of  evidence  and  records  of  the  law,  or  pre- 
served only  in  the  knowledge  of  individuals,  that  unless  it  be 
found  at  once  it  is  in  danger  of  being  lost  forever.  The  speedy 
oblivion  which  covers  up  events  that,  for  a  time,  fasten  public 
attention  and  seem  big  with  great  results,  is  indeed  one  of  the 
noticeable  indications  of  the  times.     The  practical  experience 


AN   ERIE   KAID.  137 

of  this  fact  has  tended  greatly  to  encourage  all  sorts  of  viola- 
tions both  of  law  and  of  morals.  There  seems  no  longer  to 
be  any  Nemesis  to  dog  the  evil-doer.  Men  are  to-day  in  all 
mouths  infamous  from  active  participation  in  some  great 
scandal  or  fraud,  —  some  stock  operation  or  gambler's  con- 
spiracy, some  gold  combination  or  Erie  Railway  war,  some 
Credit  Mobilier's  contractor's  job  or  Hartford  &  Erie  scandal, 
—  and  to-morrow  a  new  outrage,  in  another  quarter,  works  a 
sudden  condonation  of  each  offence. 

Nothing  could  more  fully  illustrate  the  rapidity  with  which 
such  episodes  as  those  referred  to  are  forgotten  than  the  com- 
plete oblivion  into  which  the  struggle  in  1869  for  the  pos- 
session of  the  Albany  &  Susquehanna  Railroad  has  fallen. 
This  contest,  marked  by  legal  scandals  almost  unparalleled, 
and  fictually  resulting  in  an  attempt  at  armed  waifare  between 
corporations,  though  not  yet  finally  passed  upon  by  the  courts, 
is  fairly  forgotten  by  the  world.  It  was,  however,  not  without 
elements  of  a  permanent  intei'est,  though  no  consecutive 
account  of  it  has  yet  been  attempted.  The  follow'ing  narra- 
tive, drawn  almost  exclusively  from  the  sworn  evidence  and 
official  records  in  the  case,  probably  presents  the  story  with 
as  near  an  approach  to  accuracy  as  is  now  likely  ever  to  be 
arrived  at. 

The  business  of  transportation  by  rail  naturally  divides 
itself  into  the  two  great  elements  of  through  and  local  traffic. 
The  Erie  Railway  was  especially  constructed  with  a  view  to 
through  traffic,  and  the  New  York  Central,  though  originally 
consisting  in  a  chain  of  disconnected  local  roads,  through  the 
force  of  circumstances  and  by  a  natural  process  of  develop- 
ment, early  became  one  of  the  great  trunk  lines  of  the  conti- 
nent. The  Albany  &  Susquehanna,  on  the  contrarj^  was 
designed  by  its  projectors  as  a  purely  local  road.  As  such  its 
history  could  never  have  been,  a  very  interesting  one,  except 
to  its  i)r()jectors  and  owners.  It  happened,  however,  to  occupy 
a  bit  of  debatable  territory  between  the  two  great  trunk 
lines  just  mentioned,  and  hence  derived  its  importance.     New 


138  AN   ERIE   RAID. 

England  has  always  been  in  railroad  history  a  sort  of  an  ap- 
panage of  the  Central  Railroad  of  New  York.  Both  freight 
and  passengers  passing  to  and  fro  between  Boston  and  the 
West  naturally  took  Albany  on  their  way,  and  the  Centi-al 
Road,  monopolizing  as  it  did  the  one  natural  gap  in  the  moun- 
tain ranges  which  divided  the  interior  basin  from  the  sea, 
looked  upon  this  traffic  as  its  inalienable  property.  The 
Albany  &  Susquehanna  Railroad  started  from  this  eastern 
terminus  of  the  Central,  and  was  intended  to  open  it  to  the 
Erie  at  the  city  of  Binghamton,  some  one  hundred  and  forty 
miles  from  the  point  of  departtn-e.  In  the  early  days  of  the 
enterprise  through  traffic  was  less  regarded  by  railroad  man- 
agers than  it  now  is,  and  the  future  significance  of  this  link  in 
their  system  was  hardly  realized  by  either  of  the  great  trunk 
lines.  The  carnage  of  freight  was  then  but  little  understood, 
and  grades  were  of  far  greater  importance  than  they  now  are. 
Valley  roads,  it  was  supposed,  might  safely  ignoi'e  the  moun- 
tain track.  This  the  Albany  &  Susquehanna  certainly  was. 
The  region  through  which  it  passes  is  very  broken,  though  it 
ranks  among  the  finest  of  the  agricultural  districts  of  New 
York.  Starting  from  that  point  where  the  great  Alleghany 
range  gradually  sinks  away  into  the  valley  of  the  Mohawk, 
the  road  skirts  the  base  of  the  heights  of  Helderberg,  an  out- 
lying spur  of  the  Catskills,  famous  once  as  the  seat  of  the 
anti-rent  troubles,  and  then,  passing  among  the  large  rolling 
hills  of  Southeastern  New  York,  it  gradually  climbs  the  water- 
shed. The  route  was  a  difficult  one,  and  the  road  was  costly 
of  construction  ;  laid  out  on  the  broad-gauge  principle,  as  a 
contemplated  feeder  of  the  Erie,  it  was  forced  to  scale  ridge 
after  ridge  in  working  its  way  from  one  picturesque  valley  to 
another,  through  which  to  find  a  natural  roadway  to  its  desti- 
nation. The  country  along  the  line  is  of  a  hilly  rather  than 
a  mountainous  character,  partaking  more  of  the  appearance 
of  Vermont  than  of  New  Hampsliire ;  timbered  lands  and 
cultivated  fields  alteniate  over  the  loftiest  sununits,  and  there 
is  something  peculiarly  attractive  in  the  primitive  nestling 
ajjpearaucc  of  the  towns  and  villages.     The  road  thus  was 


AN   ERIE   RAID.  139 

projected  through  a  difficult  aud  sequestered  region,  neither 
wealthy  uor  of  varied  industries,  opening  to  a  new  trade 
neither  great  markets  nor  a  peculiarly  active  people.  It  en- 
countered, therefore,  even  more  than  the  average  amount  of 
those  financial  tribulations  which  mark  the  early  history  of  all 
railroads. 

The  company  was  organized  in  1852,  and  the  work  of  con- 
struction was  begun  in  1853,  with  one  million  dollars  raised 
by  individual  subscription  along  the  line  of  the  road  ;  further 
smns  in  aid  of  construction  were  subsequently  received  from 
the  towns  likely  to  be  benefited  by  the  line,  which,  by  an  act 
of  special  legislation,  w^ere  authorized  to  subscribe  to  its  stock ; 
a  loan  of  one  million  dollars  was  likewise  obtained  from  the 
city  of  Albany,  upon  a  pledge  of  the  first-mortgage  bonds  of 
the  company.  The  process  of  construction  was,  however, 
very  slow.  The  work  begun  in  1853  was  suspended  in  1854 
on  account  of  the  failure  of  the  contractors  ;  it  was  recom- 
menced in  1857,  and  then  slowly  dragged  along  to  comple- 
tion, a  very  contractors'  Golgotha.  Eight  times  did  acts  ex- 
tending to  it  the  financial  aid  of  the  State  pass  the  legisla- 
ture ;  but  they  were  encountered  by  six  Executive  vetoes,  and 
from  this  source  the  company  realized  but  seven  hundred  and 
fifty  thousand  dollars.  That  the  scheme  was  successfully  car- 
ried out  at  all  was  mainly  due  to  the  good  pluck  and  untiring 
industry  of  one  man,  Joseph  H.  Ramsey,  —  at  once  the  origi- 
nator, president,  financial  agent,  legal  adviser,  and  guiding 
spirit  of  the  enterprise. 

The  close  of  the  seventeenth  year  of  corporate  life  found 
all  the  available  means  of  the  company  exhausted,  and  every 
one  connected  with  it,  except  Mr.  Ramsey,  thoroughly  discour- 
aged and  despondent,  with  the  twenty-two  last  and  most  dif- 
ficult miles  of  the  work  yet  unfinished.  In  this  emergency 
the  con  p  my  once  more  looked  to  the  State  for  assistance. 
Through  the  management  of  Mr.  Ramsey,  who  had  himself 
in  former  times  more  than  once  assumed  the  duties  of  a  State 
legislator  in  behalf  of  the  enterprise,  the  necessary  act  was 
passed.     Most  unexpoctedly  it  encountered  a  veto,  the  sixth 


140  AN   ERIE   RAID. 

of  the  series.  With  an  empty  treasury,  with  heavy  payments 
to  contractors  and  on  account  of  interest  already  due,  and 
with  other  similar  payments  rapidly  maturing,  —  with  bank- 
ruptcy staring  him  in  the  face,  and  with  all  sources  of  supply 
apparently  exhausted,  —  under  all  these  disheartening  aspects 
of  the  case  Mr.  Ramsey  did  not  despair.  The  company  had 
in  its  safe  two  classes  of  securities  and  two  only  on  which  the 
further  necessary  loans  could  possibly  be  effected.  It  had  a 
portion  of  its  own  second-mortgage  bonds  and  some  nine 
thousand  shares  of  its  capital  stock,  on  which  various  instal- 
ments ranging  from  ten  to  forty  per  cent  had  been  paid  by  the 
original  subscribers.  This  stock  and  the  subscriptions  upon 
it  had  subsequently  been  declared  forfeited  by  a  vote  of  the 
Board  of  Directors,  with  the  consent  of  the  holders,  for  the 
non-payment  of  the  balance  of  subscriptions.  A  law  of  New 
York  prescribed  that  no  railroad  should  issue  its  stock  for  less 
than  its  par  value.  This  law,  however,  the  courts  had  held 
did  not  apply  to  forfeited  stock  in  the  treasury  of  the  com- 
pany. The  difficulty  in  the  case  was  not  in  putting  the  stock 
on  the  market,  but  in  finding  a  purchaser  for  it  when  it  got 
there ;  it  had  no  market  price  ;  as  an  investment  it  ranked 
fixr  from  high,  and,  unlike  the  Erie,  it  had  at  this  time  no 
value  for  "  speculative  purposes."  Under  these  circumstances 
it  seemed  possible  to  the  directors  to  make  this  one  of  their 
two  securities  available  only  as  a  make-weight,  — a.doiiceu7\  it 
might  be  said,  to  the  other.  Two  loans  were  effected  accord- 
ingly, under  a  resolution  which  received  the  unanimous  ap- 
proval of  the  Board  of  Directors  on  the  3d  of  June,  1868. 
The  first  was  with  Azro  Chase,  who  became  the  purchaser  of 
fifty  thousand  dollars  of  the  second-mortgage  bonds  at  seventy 
per  cent  of  thoir  par  value,  with  the  additiojial  right  or  option 
of  taking  at  any  time  three  hundred  shares  of  the  forfeited 
stock  at  twenty  dollars  per  siiare.  This  loan  was  negotiated 
through  one  of  the  directors  of  the  company  named  Leonard, 
acting  as  ita  financial  agent,  and  amounted  to  the  sale  of 
eighty  thousand  dollars,  in  the  nominal  seciu'ities  of  the  com- 
pany, for  the  sum  of  forty-ouo  thousand  dollars  in  cash.     Two 


AN   ERIE   RAID.  141 

hundred  shares  of  the  stock,  as  it  afterwards  appeared,  passed 
into  the  pockets  of  the  director  and  financial  agent  as  a  species 
of  brokerage  commission.  The  second  loan  was  negotiated  by 
Mr.  Ramsey  himself  with  Mr.  David  Groesbeck,  the  head  of  a 
well-known  brokers'  firm  in  the  city  of  New  York,  and  for- 
merly the  business  associate  of  Mr.  Daniel  Drew.  This  loan 
was  upon  terms  somewhat  more  favorable  to  the  company 
than  the  other,  and  there  were  no  indications  of  In-okerage  in 
the  case.  The  company  received  five  hundred  and  sixty  thou- 
sand dollars,  and  pledged  as  collateral  its  sccond-mortgige 
bonds  at  seventy  per  cent,  with  the  privilege  of  purchasing 
them  at  any  time  within  eighteen  months  at  eighty,  and  a 
similar  privilege  as  regarded  twenty-four  hundred  shares  of  the 
forfeited  stock  at  twenty -five  dollars  per  share.  In  other 
words,  if  the  lenders  availed  themselves  of  the  option,  as  they 
subsequently  did,  securities  to  the  nominal  value  of  one  mil- 
lion and  forty  thousand  dollars  were  sold  to  them  for  seven 
hnndred  thousand  dollars  in  cash.  This  must  certainly  be 
considered  as  a  very  ad^'antageous  bargain  for  the  company  ; 
thirty  jjer  cent  is  a  large  profit,  but  it  here  represented  a  very 
unusual  risk.  Both  of  these  loans  received  the  unanimous 
sanction  of  the  Board  of  Directors,  and  that  to  Groesbeck 
played  a  most  important  part  in  the  subsequent  struggle  for 
the  possession  of  the  road. 

With  the  money  thus  raised  the  enterprise  was  at  last  car- 
ried through,  and,  on  the  15th  of  J«an\iary,  18G9,  seventeen 
years  after  the  organization  of  the  conipany,  the  cities  of  Bing- 
hamton  and  Albany  were  brought  into  direct  communication. 
Meanwhile  those  seventeen  years  of  construction  had  greatly 
altered  all  the  conditions  of  that  railroad  system  of  which  the 
Albany  &,  Susquehanna  Railroad  was  now  for  the  first  time 
to  become  an  integral  part.  In  1853  both  the  Erie  and  the 
Central  were  but  feebly  entering  on  their  great  cai'cers.  The 
Erie  was  just  completed  to  Dunkirk  :  the  Central  was  not  yet 
consolidated ;  the  whole  receipts  of  the  first  were  but  one 
third  part  of  what  the  completion  of  Mr.  Ramsey's  road  found 
them,  while,  during  the  same  interval,  the  receipts  of  the  last 


142  AN   ERIE    RAID. 

had  swollen  from  less  than  six  millions  per  annum  to  consid- 
erably over  fifteen.  As  for  the  men  who  managed  the  great 
trunk  lines  when  Mr.  Ramsey  had  completed  his  work,  flieir 
names  had  never  been  mentioned  in  connection  with  railroads 
when  he  began  it.  In  fact,  the  whole  aspect  of  the  problem 
had  changed.  In  1853  all  the  roads  in  the  country  were 
local  roads  ;  in  18G9  no  local  road  was  suffered  to  exist,  un- 
less the  great  through  roads  were  satisfied  that  it  could  serve 
no  pui-pose  in  their  hands  ;  nay,  more,  unless  they  were  also 
satisfied  that  it  could  serve  no  purpose  in  the  hands  of  their 
competitors.  When,  therefore,  the  projectors  of  the  Albany 
&  Susquehanna  line  had  completed  it  to  Binghamton,  they 
suddenly  foiind  themselves  involved  in  all  the  complications 
and  controversies  of  an  intricate  system.  The  intended  local 
road  was  an  element  of  strength  or  a  source  of  danger  not  to 
be  ignored  by  the  managers  of  the  great  trunk  lines. 

Messrs.  Jay  Gould  and  James  Fisk,  Jr.,  had  at  this  time 
already  succeeded  in  firmly  establishing  themselves  in  the 
practical  ownership  of  the  Erie  Railway.  Mr.  Daniel  Drew, 
some  six  months  before,  had  been  driven  out  of  its  treasurer- 
ship,  and  even  Commodore  Vanderbilt  had  been  compelled  by 
fair  means  and  by  foul  to  abandon  all  idea  of  controlling  its 
management.  When  the  Susquehanna  Road  was  completed  it 
became  at  once  a  most  important  element  in  the  successful 
prosecution  of  the  plans  of  Messrs.  Gould  and  Fisk.  It  was 
so  from  two  points  of  view,  —  either  as  regarded  their  compe- 
tition with  the  Central  Road  for  the  carriage  of  the  produce 
of  the  AVest  to  New  England  ;  or,  still  more  important,  .as  re- 
garded their  competition  with  other  agencies  fur  the  carriage 
of  coal  to  the  same  region.  The  anthracite  coal  deposits  of 
America  lie  but  a  short  distance  to  the  south  of  the  Erie  Rail- 
way. Disappointed  in  the  hope  of  successfully  competing 
with  the  (Central  Rond  for  the  carriage  of  the  produce  of  the 
West,  convinced  at  Injst  l)y  hard  experience  that  the  more  of 
this  business  the  road  Tuidertfxjk  to  do  t))e  more  hopelessly 
bankrupt  it  became,  the  Erie  managers  had  more  and  more 
turned  their  attention  to  the  business  of  transporting  coal. 


AN   ERIE   RAID.  143 

In  this  also  they  were  subject  to  a  very  sharp  competition, 
particularly  from  the  wealthy  companies  which  themselves 
owned  the  coal-beds,  and  which  now  proposed  to  supplement 
their  biisiness  as  colliers  with  that  of  carriers  also.  This  by 
no  means  met  the  views  of  the  Erie  people.  They  were  now 
entering  into  vast  contracts  with  various  coal  companies  to 
haul  many  hundreds  of  thousands  of  tons  per  anntim  ;  they 
naturally  wished  to  extend  their  connection,  as  by  doing  so 
they  accomplished  two  ends,  —  they  shut  the  coal  companies 
up  in  tlieir  mines,  making  them  dependent  on  the  Erie  Rail- 
way for  access  to  their  markets,  and  at  the  same  time  they 
secured  to  themselves  a  monopoly  in  so  far  as  the  consumers 
were  concerned  ;  they,  iu  fact,  placed  themselves  as  an  indis- 
pensable medium  between  producer  and  consumer.  The  Al- 
bany &  Susquehanna  Road  might  well  develop  into  an  inde- 
pendent and  competing  line  j  hence  they  greatly  coveted  the 
possession  of  it.  By  it  they  would  not  only  secur§  an  access 
to  Albany,  but  would  forge  the  link  which  was  to  imite  the 
Erie  with  a  whole  network  of  roads  running  north  and  east 
from  Albany  throughout  coal-consuming  New  England. 

It  is  wholly  unnecessary  to  dwell  upon  the  public  considera- 
tions which  rendered  it  unadvisable  that  the  adventurers  then 
representing  the  Erie  Railway  should  be  intrusted  with  a  prac- 
tical control  over  the  winter  supply  of  such  an  article  as 
anthracite  coal.  However  amiable  or  otherwise  they  might 
be  in  their  domestic  characters,  their  course  had  not  been 
such  as  to  make  unprejudiced  observei-s  anxious  to  repose  in 
them  so  delicate  a  duty  as  that  of  sole  purveyors  at  any  sea- 
son of  an  article  of  prime  necessity.  The  coal  companies 
naturally  did  not  look  with  any  favor  at  a  policy  which  threat- 
ened their  lines  of  communication.  Finally  Mr.  Ramsey,  as 
the  controlling  influence  in  the  Albany  &  Susquehanna  man- 
agement, neither  desired  to  surrender  the  independence  of  his 
road,  nor,  in  view  of  the  recent  experience  of  others,  did  he 
impose  implicit  faith  in  either  the  verbal  or  written  assur- 
ances or  obligations  of  the  Eric  representatives.  Possession 
was  with  them  considerably  more  than  nine  points  of  the  law, 


144  AN  ERIE   EAID. 

and  Mr.  Ramsey  evinced  a  marked  repugnance  to  ourrcnder  the 
property  intrusted  to  his  charge  into  their  iwsscssion,  regard- 
less of  any  liberal  promises  held  out  as  to  subsequent  beneficial 
results,  public  and  private,  likely  to  ensue  from  his  doing  so. 

The  position  of  Mr.  Ramsey  in  his  own  board  of  direction 
was  not,  however,  perfectly  secure.  Certahi  enmities  and 
jealousies  had,  little  by  little,  not  unnaturally  grown  up  along 
the  line  of  the  road,  and,  at  the  election  of  directors  in  1868, 
a  ticket  had  been  chosen  partly  in  the  opposition  interest. 
What  these  parties  represented  when  they  came  into  the  board 
it  is  difficult  to  say  ;  it  may  have  been  a  restless  feeling  of  dis- 
content at  the  slow  progress  of  the  enterprise,  or  a  vague 
desii'e  for  change  ;  or,  perhaps,  a  personal  dislike  and  mistrust 
of  Mr.  Ramsey.  Whatever  the  cause,  the  direction  at  the 
time  of  the  completion  of  the  road  was  divided  not  unevenly. 
This  condition  of  affairs  was  very  unsatisfactory  to  Mr.  Ram- 
sey. He  maintained  that  at  the  previous  election  he  and  his 
friends  had  been  taken  by  surprise ;  that  no  wish  for  a  change 
in  management  really  existed  in  the  minds  of  the  bulk  of  the 
stockholders ;  but,  finally,  whether  it  existed  or  not,  he  let  it 
be  distinctly  understood  that  he  did  not  intend  to  belong  to  a 
divided  direction,  and  that  at  the  coming  election  either  he  or 
his  opponents  were  to  go  out.  The  materials  for  a  lively  con- 
test for  the  control  of  the  company  in  September,  1869,  thus 
existed  in  great  abundance  and  on  all  sides. 

The  road  was  completed  in  January,  and  early  in  Jimc  the 
Erie  manipulators  began  their  preparations  to  obtain  pos- 
session of  it,  or,  as  they  more  graphically  would  have  said,  to 
"  gobble  "  it.  The  stock  of  the  road  was  nominally  quoted  at 
about  twenty-five  per  cent  of  its  i)ar  value  ;  it  was  rarely 
bought  or  sold,  and  was  supposed  to  possess  little  real  value, 
except  as  representing  the  control  of  the  enterprise.  It  was 
almost  exclusively  in  the  hands  of  three  classes  of  owners,  — 
the  directors  and  tho:je  dwelling  along  the  line  of  the  road, 
subscribing  municipalities,  and  certain  capitalists  who  held  it 
jiH  security  for  money  advanced  and  exi)ended  in  construction. 
The  subscription  books  of  the  company  had  never  been  closed, 


AN    ERIE    liAID.  14o 

as  but  two  million  eight  hniidred  thousand  dollars  of  the  four 
million  dollars  of  authorized  capital  had  ever  been  subscribed, 
and  of  the  amount  of  stock  which  had  been  subscribed  for, 
eight  hundred  thousand  dollars  had  l)een  forfeited  in  tlie  man- 
ner already  mentioned.  Whoever  desired  to  get  possession 
of  the  property  had,  therefore,  to  obtain  the  control  for  a 
longer  or  shorter  period,  to  include  the  election  day,  of  a 
majority  of  this  stock.  The  Erie  party  wishing  to  come  in, 
and  the  opposition  minority  determined  not  to  go  out,  thus 
had  natural  affinities  to  each  other.  But  though  when  united 
they  controlled  a  formidable  minority  of  the  whole  stock,  yet 
it  was  by  no  means  the  majority,  and  the  Ramsey  party  was 
now  thoroughly  alive  to  the  danger  of  the  situation.  Tl  e 
])lan  for  the  approaclung  campaign  was  soon  matured.  Under 
a  sudden  demand  for  election  purposes  the  stock,  which  for 
yeai's  had  been  nominally  quoted  at  twenty,  rose  rapidly  in 
July  to  forty  and  fifty,  and  even  to  sixty  and  sixty-five  per 
cent.  All  parties  were  buying.  The  issue  was,  however,  to 
be  decided  by  stock  held  by  municipalities,  and  it  was  to  tlie 
control  of  this  that  the  greatest  efforts  were  devoted.  Here 
lay  the  stronghold  of  the  Ramsey  party ;  and  liere  they  felt 
secure,  for  the  law  authorized  the  town  commissioners,  who 
held  this  stock  as  trustees,  to  sell  it  only  for  cash  and  at  its 
par  value,  and  forbade  them  to  sell  it  for  less  imless  specially 
authorized  to  do  so  by  a  town  vote.  This  was  a  point  which 
it  seemed  hardly  likely  to  touch.  Suddenly,  and  to  their 
great  dismay,  Mr.  Ramsey  and  his  friends  heai'd  of  agents  out 
among  the  towns  offering  the  commissioners  par  for  the  stock, 
provided  the  offer  was  accepted  at  once.  Naturally  this  was 
a  great  temptation  to  commissioners  who  rej)resented  towns 
which  grievously  felt  the  weight  of  railroad  loans.  These 
men  were  suddenly  called  upon  to  accept  or  reject,  on  their 
own  responsibility,  fin  offer  which,  a  few  days  before,  would 
have  seemed  incredible,  but  the  acceptance  of  which,  while  it 
would  relieve  the  town  of  debt,  would  also  deprive  it  of  all 
voice  in  the  management  of  the  road  waited  for  so  long.  In 
a  number  of  cases  the  conunissioners  considered  it  their  duty 
7  J 


146  AX   ERIE   RAID. 

to  accept  the  offer,  aud  the  control  of  several  hundred  shares 
was  in  this  way  secured.  The  Ramsey  party  was  thus  forced 
into  the  field,  and  the  stock  of  towns  rose  to  a  premiiun. 
This  process,  however,  involved  a  very  considerable  outlay 
of  money  and  no  inconsiderable  risk  of  loss.  Buying  up  a 
majority  of  the  stock  was  altogether  too  much  like  j)aying  for 
a  road.  Why  should  that  be  obtained  at  great  cost  which 
could  equally  well  be  got  for  nothing  ?  Stimulated  by  the 
passion  which  Mr.  Fisk  has  happily  described  as  an  inherited 
disposition  "  to  rescue  things  out  of  somebody  else,"  one  Sun- 
day afternoon,  early  in  August,  a  party  of  gentlemen  met  at 
the  Fifth  Avenue  Hotel  in  New  York  and  arranged  a  new 
plan,  involving  the  certain  transfer  of  the  road  into  their 
hands,  but  avoiding  the  necessity  of  further  pecuniaiy  outlay. 
A  negotiation  was  successfully  concluded  for  the  purchase  of 
four  hundred  and  fifty  thousand  dollars  of  the  stock  of  various 
towns  on  the  following  terms  :  no  money  was  to  pass,  but  the 
bonds  of  Messrs.  Gould  and  Fisk  were  given,  binding  them  to 
purchase  and  pay  for  the  stock  after  the  election,  provided  the 
commissioners  should  at  the  election  vote  as  the  givers  of  the 
bond  should  direct.  The  legal  effect  of  such  an  arrangement 
may  well  have  escaped  the  town  commissioners,  but  Messrs. 
Fisk  aud  Gould  had  not  as  a  rule  up  to  this  time  been  found 
deficient  in  matters  of  technical  nicety.  These  bonds  had  no 
binding  force  whatever.  It  was  not  a  sale  for  cash,  it  was 
contrary  to  law  and  to  public  policy ;  it  was  an  arrangement 
wholly  beyond  the  powers  of  the  commissioners  to  make,  and 
one  which  the  courts  would  not  sustain.  The  conunissionors 
who  accepted  these  bonds  and  who  subsequently  did  vote  as 
those  who  gave  them  dictated,  were  public  officials,  as  such 
their  duties  were  prescribed  and  were  sufficiently  simple  ;  they 
could  sell,  and  the\'  could  vote,  but  if  they  sold  it  was  to  be 
for  cash  down,  and  if  they  voted  it  was  to  l)e  on  their  own 
judgments,  and  not  on  those  of  other  people.  In  this  carje, 
indeed,  what  security  had  they  that,  after  they  had  voted  the 
road  into  the  hands  of  the  Eric  managers,  the  conditions  of 
the  bond  in  regard  to  the  purchase  of  the  stock  woiUd  be  ful- 


AN  erip:  raid.  147 

filled  1  As  a  matter  of  fact  they  did  vote  as  they  agreed,  but 
nothing  further  was  ever  done  to  complete  the  ti'ansfer  of  the 
stock. 

Events  now  moved  rapidly  on  both  sides.  On  the  3d  of 
August  the  certificates  of  town  stock  were  presented  for  trans- 
fer. It  was  a  new  question ;  Mr.  Ramsey  was  away,  and  the 
treasurer  hesitated.  Finally,  all  stock  sold  for  cash  and  paid 
for  by  either  side  was  transferred  ;  but  the  transfer  was  denied 
where,  in  the  opinion  of  the  treasurer,  the  transaction  was 
not  completed.  It  was  evident  they  were  pressing  the  Ramsey 
party  heavily.  It  now  occnrred  to  Ramsey  that  the  subscrip- 
tion-books had  never  been  closed,  and  that  twelve  thousand 
shares  of  the  capital  stock  of  the  company  were  as  yet  unis- 
sued. On  the  5th  he  took  the  subscription-book  home  with 
him,  held  a  meeting  of  a  few  of  his  friends,  and,  among  them, 
they  wrote  down  their  names  for  nine  thousand  five  hundred 
shares  of  stock.  It  was  fully  understood  that  this  sul)scriptiou 
bound  those  who  made  it  to  no  immediate  payments ;  ten  per 
cent  was  to  be  paid  in  at  once,  and  for  this  Ramsey  was  to 
provide  ;  the  remainder  would  only  be  called  in  as  should  be 
ordered  by  the  board  of  directoi*s  whom  this  very  stock  would 
elect.  Meanwhile,  if  any  of  the  subscribers  desired  to  get  rid 
of  their  stock,  Ramsey  undertook  to  relieve  them  of  it.  That 
this  subscription,  made  by  directors  in  secret  on  the  eve  of  an 
election,  and  with  a  view  of  affecting  that  election,  should  have 
subsequently  been  held  legal  is  open  to  criticism;  its  good 
faith  even  might  well  have  been  suspected  ;  but  that,  on  grave 
consideration,  it  should  be  justifiable  is  perhaps  as  severe  a 
censiu'e  as  could  be  passed  on  the  condition  of  affaii-s  existing 
in  the  community  in  which  it  was  made.  Yet,  under  the  cir- 
cumstances, unnecessary  and  xmfortunate  as  the  step  after- 
wards proved  to  have  been,  Mr.  Ramsey  and  his  friends  were 
justified  in  taking  it.  It  is  simply  necessary  to  refer  to  those 
who  now  sought  to  obtain  control  of  the  Albany  &  Susque- 
hanna Railroad.  Their  [)Osition  in  the  community,  their  stand- 
ing in  the  courts,  their  financial  and  fiduciary  relations,  were 
notorious.     They  had  reduced  society  to  a  condition  in  which 


148  AN  ERIE   RAID. 

any  man  brought  into  conflict  with  tliem  could  not  but  realize 
that  he  had  only  himself  to  rely  on,  that  a  species  of  Lynch 
law  prevailed,  and  that  might  and  possession  alone  counted  for 
anything.  The  first  duty  of  Mr.  Ramsey  then,  unquestion- 
ably, was  to  keep  the  property  intrusted  to  his  charge  out  of 
the  hands  of  those  men  ;  this  every  consideration  of  honor  and 
of  responsibility  bound  him  to  do  at  any  cost  and  by  all  legal 
means,  certain  that,  whatever  he  might  scruple  at,  his  oppo- 
nents, once  in  control,  would  scruple  at  nothing.  This  step 
was  legal,  and,  however  questionable  in  many  aspects,  Mr. 
Ramsey  and  his  friends  were  justified  in  taking  it,  provided 
they  made  their  subscriptions  in  good  faith  to  their  company, 
and  held  themselves  responsible  for  them.  At  best,  however, 
it  was  an  error  in  judgment.  By  it  Mr.  Ramsey  sacrificed 
much  of  the  strength  of  his  position,  which  lay  in  the  fact 
that  he  was  fighting  men  who  had  set  the  most  infamous  pre- 
cedents ever  known  for  transactions  of  a  not  dissimilar  char- 
acter. As  usual  in  dealing  in  measures  of  questionable  right 
and  expediency,  one  doubtful  step  soon  led  to  another  which 
admitted  of  no  doubt. 

Ten  per  cent  on  the  amount  of  the  subscriptions  had  at 
once  to  be  provided,  and  that,  too,  by  Ramsey,  whose  resources 
were  already  strained  to  the  utmost.  Again  he  had  recourse 
to  Groesbeck,  and  drew  on  him  for  $100,000;  he  had  also 
subscribed  for  more  stock  in  Groesbeck's  name.  The  subscrip- 
tion, involving  as  it  did  further  possible  calls  to  the  full  value 
of  the  stock,  Groesbeck  politely  declined  ;  the  draft  he  luni- 
ored,  receiving  as  collateral  for  it  a  deposit  of  $150,000  of  the 
equipment  bonds  of  the  Albany  &  Susquehanna  Railroad  Co., 
which  belonged  to  the  road,  and  which  Mr.  Ramsey  procured 
from  the  treasurer  for  the  jjurpose  of  so  pledging  them.  The 
ten  per  cent  of  the  8ubscrij)tion  was  thus  paid  in,  and  the  nine 
thousand  five  hundred  shares  were  placed  on  the  books  of  the 
company  to  the  credit  of  the  nominal  siibscribers,  each  of 
whom  gave  Ramsey  a  voting  proxy  for  the  coming  election. 
Months  afterwards  Mr.  (Jroesbeck  defended  this  transaction, 
and  declared  that,  luulor  the  same  circumstances  and  fighting 


AX    KRIK    HAID.  149 

the  same  men,  he  himself  would  have  gone  as  far,  and  further 
too,  if  necessary.  The  proceeding  was,  however,  none  the  less 
indefensible.  The  securities  which  had  thus  been  misapplied 
were  shortly  after,  at  Groesbeck's  own  suggestion,  returned  to 
the  officials  of  the  company,  and  their  place  supplied  by  col- 
lateral of  inferior  value  ;  and  as  for  the  stock,  it  was  never 
voted  on,  and  the  issue  of  it  only  served  to  endanger  the  case 
of  the  Ramsey  party.* 

This  took  place  on  the  5th  of  August,  but  already  the  usual 
storm  of  judicial  orders  and  injunctions  had  begun.  The  stock 
of  the  towns  being,  so  far  as  jiossible,  secured,  the  next  blow 
was  directed  at  the  stock  reissued  and  held  as  collateral.  Two 
blocks  of  this  were  outstanding,  —  one  in  the  hands  of  Chase, 
the  other  in  those  of  Groesbeck.  On  the  application  of  Messrs. 
Gould  and  Fisk's  counsel,  an  injunction  was  issued  by  Mr. 
Justice  Barnard,  of  the  Supreme  Court,  forbidding  any  votes 
being  cast  upon  this  stock,  and  ordering  its  transfer  to  a  re- 
ceiver pending  judicial  investigation ;  all  this  upon  the  ground 
that  the  stock  was  unlawfully  issued.  The  books  were  to  close 
iipon  the  7th,  the  order  was  procured  on  the  4th.  While  this 
was  going  on  in  the  city,  the  Ramsey  party  was  not  idle  in  the 

*  This  atid  the  prsvious  paras^raph  are  repiiblishecl  in  the  form  in  which 
they  originally  appeared.  Yet  it  may  well  be  questioned  whether  even  the 
modified  censure  implied  upon  Mr.  Ramsey's  proceedings  would  bear  exami- 
nation. Ordinary  rules  cannot  always  govern  exceptional  cases.  If  a  m»n 
finds  himself  involved  in  an  every-day  controversy,  however  angry,  lie  i.s 
very  properly  expected  to  confine  liimself  to  recognized  remedies;  if,  however, 
he  is  suddenly  roused  from  his  sleep  by  the  assault  of  midnight  robbers,  he 
cannot,  if  he  is  a  man  of  courage,  be  called  upon  to  exercise  any  nice  Judg- 
ment as  to  the  use  he  may  make  of  the  weapons  nearest  .at  hand :  —  it  is  a 
case  of  self-preservation.  Especially  would  this  be  true  if  his  assailants  were 
notoriously  in  collusion  with  the  watch.  If  Ramsey  had  hesitated,  even  for 
an  instant,  his  friends  would  have  lost  courage,  and  lie  could  never  have  re- 
covered himself;  under  the  circumstances  it  is  very  difficult  to  see  wliv  ho 
was  not  as  fully  justified  in  the  use  of  any  and  every  weapon  as  a  man  would 
be  in  a  struggle  for  his  life.  Of  course  in  the  one  case  or  the  other  he  would 
be  amenal)le  to  the  law  for  any  illegal  act.  The  question  is  o  e  purely  of  moral 
accountability;  legally,  a  man  so  circumstanced  must  act  at  his  own  peril.  He 
may  infringe  laws,  and.  if  he  does,  he  must  be  prepared  to  undergo  the  peralty 
of  so  doing,  but  it  may  yet  be  his  duly  to  incur  that  penalty  in  defence  of  his 
trust. 


150  AN   KRIE    RAID. 

country.  On  tlie  same  day  they  appeared  befoi'e  Judge  Parker 
of  Owego  and  commenced  a  suit,  resulting,  of  course,  in  the 
inevitable  injunction,  by  which  all  parties  were  restrained  and 
enjoined  from  transferring  on  the  books  of  the  company  seven 
hundred  shares  of  stock  belonging  to  the  town  of  Oneonta,  and 
which  the  Erie  party  claimed  to  have  purchased.  No  sooner 
did  the  news  of  this  move  arrive  in  New  York,  than  Mr. 
Thomas  G.  Shearman,  a  member  of  the  firm  of  Field,  Shear- 
man, &  Co.,  and  one  of  the  most  trusted  legal  advisers  of  those 
now  controlling  the  Erie  Railway,  was  despatched  to  Owego, 
where  he  succeeded  in  getting  the  injunction  dissolved.  Hith- 
erto the  engagement  had  been  at  long  range,  as  it  were,  l)ut 
it  now  lacked  a  few  days  only  of  the  date  when  transfers 
previous  to  the  election  were  to  cease ;  it  was  time  for  close 
quarters.  Not  content  with  the  success  of  his  defensive  op- 
erations, the  Erie  counsellor  at  once  assumed  a  vigorous  offen- 
sive. Two  new  suits  were  initiated,  —  one  to  compel  the 
immediate  transfer  of  that  very  Oneonta  stock  which  the  com- 
pany had  just  previously  sought  to  prevent ;  and  the  other,  a 
more  vital  thrust  still,  sought  to  restrain  Ramsey  himself  from 
the  further  performance  of  his  duties  as  president  of  the  com- 
pany. It  is  almost  mmecessary  to  say  that  both  the  desired 
orders  were  almost  immediately  obtained.  The  board  of  di- 
rection was  divided  into  two  hostile  camps  exactly  equal  in 
strength,  —  they  stood  seven  to  seven.  The  suspension  of  Mr. 
Ramsey  thus  turned  the  scale  and  placed  the  Erie  opposition 
iu  the  majority.  It  remained  only  to  call  a  meeting  of  the 
directors,  over  which  the  vice-president,  whose  sympathy  with 
the  Erie  nioveiuent  was  j)ronounced,  would  preside,  and  this 
meeting  would  vf)te  out  of  office  the  present  treasurer,  who 
hesitated  about  tlie  desired  transfers,  and  would  replace  him 
by  a  suitable  successor.  Absolute  control  of  the  books  thus 
secured,  the  election  might  be  i-egarded  as  a  mere  matter  of 
detail.  All  the  day  of  that  meeting  the  offices  of  the  company 
swarmed  with  indignant  directore  and  opposing  counsel  ;  angry 
words  passed,  loud  tlireats  were  uttered  ;  the  suspended  presi- 
dent was  informed  that  his  presence  was  undesired,  and  the 


AN    ERIK   KAID.  151 

iinsuspended  vice-president  showed  a  sti'ong  disposition  to 
assume  also  the  duties  of  treasui'er  in  so  for  as  these  involved 
the  entering  of  transfers  and  the  issuing  of  certificates  of  stock. 
At  last  a  sort  of  tussle  took  place  over  the  books,  and  then  the 
police  were  called  in,  who  established  an  angry  truce.  All 
this  took  place  on  the  5th ;  on  the  7th  the  books  were  to  be 
closed. 

The  control  of  those  books,  it  was  well  understood,  implied 
the  control  of  the  road.  The  presence  of  James  Fisk,  Jr., 
and  of  Jay  Gould  in  the  struggle  was  no  mystery,  and  the 
officers  of  the  road  could  not  fail  to  recall  how,  only  a  few 
months  before,  the  vault  of  the  Union  Pacific  Railroad  had 
been  forced,  in  a  vain  search  for  the  books  of  the  company, 
under  cover  of  a  judicial  process  and  at  the  dictation  of  these 
very  men.  That  the  records  were  not  in  safety  while  in  the 
offices  of  the  corporation  was  notorious.  That  night,  in  the 
presence  of  counsel,  and  with  the  knowledge  of  the  treasurer, 
they  were  removed  from  the  building.  The  law  guaranteed  to 
stockholders  access  to  the  books  of  the  corporation  ;  the  judi- 
cial abuse  of  the  processes  of  law  had  converted  this  right 
into  a  facility  for  fraud.  Whether  those  who  would  now  insist 
upon  the  right  were  likely  to  avail  themselves  of  that  oppor- 
tunity was  a  question  in  regaixi  to  which  recent  experience  in 
other  quarters  might  warrant  the  formation  of  an  opinion.  In 
any  case  the  books  were  now  surreptitiously  removed  under 
the  advice  of  counsel,  and  the  action  of  the  officials  who 
assented  to  this  removal  was  indorsed  by  public  opinion,  and, 
throughout  the  subsequent  proceedings,  was  not  censured  by 
the  courts. 

The  next  day  the  opposition  wing  of  the  direction  met  and 
organized  with  the  vice-president  in  the  chair.  Just  as  they 
were  proceeding  to  business,  however,  an  attorney  of  the 
other  wing  quietly  entered  the  room  and  served  upon  four 
of  those  present  a  new  judicial  order,  restraining  them  from 
acting  as  directors  of  the  company,  or  from  interfering  with  its 
affiiirs.  This  unexpected  move,  leaving  them  without  a  quo- 
nun,  fell  like  a  thunderbolt  on  the  Albany  members  of  the 


152  AN   ERIK   RAID. 

Erie  party,  and  they  precipitately  retired  from  the  field  and 
took  the  first  train  to  New  York  in  searcli  of  counsel  and 
assistance. 

Reaching  the  Grand  Opera  House  and  the  offices  of  the  Erie 
counsel,  the  fugitives  laid  their  case  before  Mr.  Sheannan. 
The  quick  eye  of  that  gentleman  at  once  took  in  the  whole 
situation,  and  he  was  not  unequal  to  the  emergency.  The 
})resident,  vice-president,  and  a  majority  of  the  board  of  di- 
rection were  now  suspended,  and  the  Albany  &  Susquehanna 
Railroad  was  suspended  with  them  ;  every  one  was  enjoined ; 
there  was  no  one  authorized  to  give  an  order  or  to  pay  out  a 
dollar ;  chaos  was  come  again.  Recognizing  the  fact  that  a 
court  of  equity  had  done  this  mischief  through  the  exercise 
of  one  of  its  powers,  Mr.  Shearman  was  inspired  with  a  con- 
viction that  the  same  court  must  repair  it  by  the  exercise  of 
another  power,  — injunctions  had  occasioned  the  dead-lock,  a 
receivership  must  dissolve  it.  A  new  suit  was  at  once  com- 
menced, the  complaint  in  which  set  forth  the  existing  condi- 
tion of  aftairs,  and  prayed  for  the  appointment  of  receivers 
who  should  operate  the  road,  and  so  avert  the  disastrous  con- 
sequences otherwise  sure  to  ensue.  This  paper  was  drawn  up 
by  Mr.  Shearman  at  his  office  in  the  Twenty-third  Street  Opera 
House,  on  the  aftenioon  of  Friday  the  6th  of  August.  It  was 
not  ready  for  signature  until  the  hour  of  ten  o'clock,  P.  M.  'i'he 
(irand  Opera  House  is  not  in  the  immediate  vicinity  of  any 
court  of  law,  nor  do  judges  generally  frequent  their  court- 
rooms at  late  hours  on  August  evenings.  The  private  resi- 
dence of  Mr.  Justice  Barnard  was  on  Twenty-first  Street,  at 
least  iialf  a  mile  away,  and  on  the  morning  of  this  day  the 
Justice  himself  was  at  the  bedside  of  his  dying  mother  at 
Ponghkeepsie,  seventy-five  miles  from  New  York.  Telegmphs 
from  Mr.  Fisk  had,  liowever,  found  him  there  and  summoned 
Iiim  to  the  city.  The  order  was  ready  for  signature  at  10.20 
P.  M.,  when  it  was  delivered  to  a  junior  partner  of  the  .firm 
of  Field,  Shearman,  &  Co.,  who  thereupon  left  the  Grand  Opera 
House  and,  in  fifteen  minutes,  returned  witli  what  ])urported 
to  be  Judge  IJaniard's  signature  aj)pended  to  it.     A  strange 


AN   ERIE   RAID.  153 

obscurity  hangs  over  this  part  of  the  transaction.  It  was 
never  stated  throughout  the  subsequent  proceedings  where 
this  order  was  signed  ;  it  was  never  proved  that  it  had  then 
been  signed  by  Judge  Barnard  at  all.  Diligent  inquiry  at  a 
date  long  subsequent  failed  to  discover  any  trace  of  it  in  the 
records  of  the  court ;  no  evidence  was  ever  elicited  that  Judge 
Barnard  was  in  New  York  at  any  time  during  that  day.  It 
was  subsequently  said  to  have  been  signed  at  the  house  of 
Fisk's  mistress  ;  but  this  strange  statement  only  called  forth 
a  bare  denial  unaccompanied  by  any  explanation.*  That  this 
order,  whether  there  signed  by  him  or  not,  was  subsequently 
adopted  as  his  own  by  Judge  Barnard  admits  of  no  doubt. 
Under  the  most  favorable  supposition  it  would  appear  that 
the  surprisingly  brief  period  of  fifteen  minutes  had  sufficed 
to  go  through  all  the  forms  and  make  all  the  inquiries  neces- 
sary to  satisfy  the  judicial  mind  in  regard  to  so  trifling  a 
matter  as  the  receivership  of  some  one  hundred  and  fifty  miles 
of  railroad,  involving  millions  of  capital.  This  order  appointed 
Charles  Courter,  of  whom  the  judge  probably  knew  absolutely 
nothing,  and  James  Fisk,  Jr.,  of  whom  he  undoubtedly  knew  a 
great  deal,  receivers  of  the  Albany  &  Susquehanna  Railroad 
Co.  Criticism  is  wholly  unnecessary.  The  whole  proceeding 
reflects  the  highest  credit  on  the  energy  of  all  concerned  :  it 
speaks  volumes.  The  law's  delay  is  an  ill  of  which  the  citi- 
zens of  New  York,  certainly,  have  no  cause  to  complain,  at  all 
times  and  under  all  circimistances. 

By  half  after  ten  o'clock  all  was  settled,  and  at  eleven  the 
two  receivers,  accompanied  by  a  select  body-guard  of  directors, 
friends,  and  lawyers,  were  on  their  way  by  the  night  train  to 
take  possession  of  their  charge.     Their  opponents  had,  how- 

*  It  has  since  been  stated,  on  the  authority  of  .Tudee  Barnard,  that  he  acci- 
dentally met  the  counsel  on  his  way  from  the  cars  to  his  house,  and  was  asked 
by  him  to  sign  the  order;  that  he  did  so,  stepping  into  a  reighboring  real- 
estate  office  for  the  purpose.  The  meeting  was  certainly  a  singular  coinci- 
dence, and  the  method  indicated  of  transacting  judicial  business  of  the  first 
importance  is  calculated  to  excite  surprise,  if  not  consternation  The  "  ex- 
planation "  seems,  however,  to  have  been  considered  perfectly  satisfactory  by 
those  to  whom  it  was  made. 
7* 


154  AN  ERIE   RAID. 

ever,  already  got  an  inkling  of  the  summary  process  impend^ 
ing  over  them  from  New  York,  and,  while  Mr.  Shearman  was 
busy  with  the  preparation  of  his  order  in  the  Grand  Opera 
House,  other  counsel  were  no  less  busy  in  the  opposing  camp 
at  Albany  preparing  a  coxmter-order,  appointing  another  re- 
ceiver in  their  own  interest.  This,  when  completed,  was  duly 
submitted  to  Mr.  Justice  Peckham,  of  the  Supreme  Court 
of  the  Albany  district,  between  nine  and  ten  o'clock  of  the 
same  (Friday)  evening.  The  signature  of  this  magistrate  was 
affixed  to  it,  and  a  Mr.  Pruyn,  of  Albany,  was  by  him  appointed 
receiver  of  the  Albany  &  Susquehamia  Railroad  Co.  It  was 
close  work.  Each  order  took  effect  when  signed,  and  there 
certainly  was  no  delay  in  their  preparation,  and  even  less  in 
procuring  signatures  to  them.  The  evidence  seemed  subse- 
quently to  indicate  that  the  Albany  receivership  had  about 
one  hour's  priority  in  time ;  it  had,  however,  one  hundred  and 
fifty  miles  of  distance  in  its  favor,  and  the  great  weight  which 
attaches  to  possession  as  an  element  of  success  in  litigation 
has  long  since  passed  into  a  provei'b. 

Thus,  on  Saturday,  the  7th  of  August,  everything  indicated 
a  collision  of  forces,  No  sooner  had  Receiver  Fisk  reached 
Albany,  and  received  the  reports  of  his  scouts,  than  he  hast- 
ened with  his  friends  to  the  offices  of  the  company.  He 
arrived  there  towards  eight  o'clock.  In  spite  of  this  praise- 
worthy activity  on  their  part,  Messrs.  Fisk  and  Courter,  on 
proceeding  to  take  possession  of  the  premises,  encountered  a 
somewhat  unexpected  obstacle  in  tlio  person  of  a  Mr.  Van 
Valkenburg,  the  superintendent  of  the  road,  who,  upon  being 
informed  of  their  errand,  announced  that  he  was  already  in 
jwssession  under  the  orders  of  Receiver  Pruyn,  and  further 
intimated  that  he  did  not  propose  to  abandon  it.  A  very 
amusing  and  somewhat  exciting  scene  then  ensued.  The 
junior  appointee  of  Mr.  Justice  Barnard  presented  his  papers 
to  the  superintendent,  seated  hiniself  on  tlie  table,  announced 
himself  as  Mr.  James  Fisk,  Jr.,  of  New  York,  come  to  take 
pos-session  and  prepared  to  do  so  if  it  required  "millions  of 
money  and  an  unlimited  number  of  men."     He  further  added 


AN   ERIE    RAID.  loo 

that  this  was  his  twenty-sixth  raid  of  the  same  character,  and 
that  he  proposed  "  to  take  you  fellows  " ;  to  all  of  which  Mr. 
Van  Valkenburg  pleasantly  replied  that  he  "  hoped  he  would 
have  a  good  time  doing  it."  His  companions  Mr.  Fisk  intro- 
duced as  his  "  boys,"  and  invited  them  in  to  possess  them- 
selves. Quite  a  lively  colloquy  ensued,  which  was  not  satis- 
factory to  Mr.  Fisk,  who  from  words  gradually  proceeded  to 
ovei't  acts,  and  finally  ordered  his  "boys  "to  put  the  other 
"  boys  "  out.  Unfortunately  the  preponderance  of  force  was 
not  on  his  side.  Instei>d  of  ejecting  nis  opponents,  he  was 
summarily  ejected  himself,  and,  after  being  ignominiously  and 
very  roughly  hustled  down  stairs,  he  found  himself  in  the 
street  in  a  very  dishevelled  condition.  Nor  did  his  dis- 
comfiture stop  here  ;  no  sooner  did  he  reach  the  pavement 
than  he  was  arrested  by  a  fiery  little  individual,  claiming  to 
be  a  policeman,  and  ignominiously  marched  ott'  to  the  station- 
house.  As  no  complaint  was  prefciTed  he  was  speedily  re- 
leased, but  probably  not  until  he  had  discovered  that  his 
arrest,  like  his  ejectment,  was  the  work,  not  of  a  policeman, 
but  of  an  employee  of  the  company.  No  sooner  was  he  again 
a  free  man  than  he  returned'  to  the  charge.  Mr.  Pruyn  was 
now  at  the  offices  in  person,  claiming  to  be  in  possession  as 
receiver,  and  a  crowd  of  lawyers,  officers,  and  parties  in  interest 
had  also  assembled  there.  The  heads  of  the  opposing  factions 
met  fiice  to  face.  No  further  riotous  demonstrations  were  at- 
tempted, l)ut,  pending  advices  from  New  York,  Mr.  Fisk  kept 
\ip  the  semblance  of  a  possession.  He  evidently  bore  no  ill- 
Avill  to  Mr.  Van  Valkenburg,  on  account  of  the  rough  treat- 
ment of  the  morning,  as  he  even  went  so  far  as  to  compliment 
that  gentleman  on  his  display  of  energy,  and  to  signify  a  de- 
sire to  extend  to  him  his  personal  favor.  As  to  Mr.  Ramsey, 
Mr.  Fisk,  as  a  happy  solution  of  existing  complications,  sug- 
gested that  the  possession  of  the  road  shoidd  be  decided,  not 
as  of  old  by  a  personal  contest  between  the  two  heads  of  the 
opposing  fiictions,  but  by  the  goddess  of  chance,  or  whatever 
other  divinity  may  preside  ovei*  the  issue  of  a  game  of  "  seven 
up " ;  and,  with  such  interchange  of  amenities  and  pleasant 


156  AN   ERIE   KAID. 

sallies  of  wit,  with  now  and  again  the  service  of  some  notice 
or  order  of  court,  and  perhaps  an  injnnction  or  two,  the  pro- 
tege  of  Barnard  beguiled  the  weary  monotony  of  the  day. 

The  cessation  of  active  hostilities  did  not  last  long.  The 
discomfiture  of  the  morning  had  been  at  once  telegraphed  to 
Mr.  Shearman,  in  the  recesses  of  the  Grand  Opera  House,  and 
that  gentleman  had  forthwith  proceeded  to  discover  and  apply 
the  suitable  remedies  of  the  law.  Kecourse  was  at  once  had, 
or  is  alleged  to  have  been  had,  to  Judge  Barnard,  sitting  at 
special  term  in  the  court-hoixse.  Again,  however,  a  curious 
obscurity  hangs  over  the  actual  whereabouts  of  that  magistrate. 
On  this  day  his  mother  was  still  lingering  at  Poughkeepsie,  and 
another  judge  was  sitting  at  special  tenn  in  the  court-house. 
In  any  case  a  most  unusual  and  indeed  wellnigh  antiquated  writ, 
never  before  granted  to  meet  such  an  exigency  as  that  which 
had  now  arisen,  was  at  once  exhumed  and  prepai'ed.  In  the 
first  place  a  new  and  sweeping  injunction,  purporting  to  have 
l)een  granted  by  Judge  Barnard,  was  obtained,  by  virtue  of 
which  Mr.  Receiver  Pniyu,  the  sheriff  of  the  county,  the 
Albany  police,  and  all  the  railroad  employees,  were  restrained 
from  any  interference  with  receivers  Courter  and  Fisk.  Not 
satisfied  with  this,  a  writ  of  assistance  *  was  likewise  ordered 
to  issue,  by  which  the  slicriff,  and,  if  need  be,  the  j^osse  comi- 
tatuft,  were  placed  at  the  disposal  of  Messrs.  Fisk  and  (]!ourter. 
This  was  a  sufficiently  unusual  proceeding,  but  the  service 
of  the  process  was  so  extraordinary  that  the  ordering  it  was 
at  once  reduced  to  tjie  conmionplace.  Now,  probably  for  the 
first  time  on  record,  both  injunction  and  writ  were  forwarded 
to  their  destination  for  service  by  electric  telegra])h.  That 
afternoon  officers  in  Albany  actually  undertook  to  serve  upon 
parties  to  a  suit  processes  which  had  been  issued  in  New  York 

*  "  Writs  to  tho  sbcriflT,  toassiiRt  a  receiver,  sequestrator,  or  other  party  to  a 
suit  in  clianccry,  to  get  possession,  under  a  decree  of  the  court,  of  lands  with- 
held from  him  by  another  party  to  the  suit.  These  writs,  which  issue  from 
the  equity  side  of  the  Court  of  Exclic<|U('r,  or  from  any  other  court  of  cliau- 
cery.  are  at  least  as  old  as  the  reign  of  James  I.,  and  arc  still  in  common  use 
in  England.  Ireland,  and  some  of  the  United  States."—  Quincy'a  (Mum.)  Re- 
l>ortt,  p.  396. 


AN   ERIE   RAID.  157 

not  an  hour  before,  on  the  strength  of  affidavits  as  to  facts 
which  had  that  day  occurred  in  Albany.  In  place  of  making 
service  with  the  original,  bearing  the  seal  of  the  court  and  the 
signature  of  the  judge,  the  very  ink  of  the  copies  which  the 
officers  had  in  their  hands  was  not  yet  dry.  Of  coui'se  such 
a  service  was  contemptuously  disregarded,  nor  did  the  sheriff 
presume  to  insist  upon  it. 

It  was  now  afternoon,  and  it  was  very  evident  that  nothing 
further  could  be  effected  this  day;  both  parties,  however, 
claimed  to  be  in  possession,  and  neither  would  yield  the 
ground.  Finally  a  species  of  truce  was  arranged  to  hold  good 
over  the  coming  Sunday.  A  representative  of  each  party 
was  to  be  left  in  the  offices,  and,  before  nine  o'clock  of  the 
coming  Monday,  no  act  of  hostility,  open  or  covert,  in  so 
far  as  possession  was  concerned,  was  to  be  attempted  by 
either  side. 

The  interval  of  Sunday  was  passed  in  active  preparation. 
While  the  representatives  of  the  receivers  tarried  in  the  de- 
serted offices,  the  principals  themselves  were  busy  with  their 
plans  of  campaign.  Mr.  Fisk  and  his  friends  among  the  direc- 
tors retired  to  New  York  to  get  advice  and  the  originals  of  the 
telegraphed  writs  ;  Mr.  Pruyn  and  the  Ramsey  party  stoutly 
prepared  themselves  in  Albany  for  such  trials  as  the  morrow 
might  bring  forth.  The  issue  now  presented  was,  in  plain 
language,  one  simply  of  judicial  nerve.  It  was  a  conflict  be- 
tween the  judiciary  of  New  York  City  and  that  of  the  country. 
The  system  of  electing  judges  by  the  popular  vote  had  at  last 
brought  forth  bitter  fruit,  and  men  had  been  elevated  to  the 
bench  who  should  have  ornamented  the  dock.  These  selec- 
tions did  not  perhaps  extend  beyond  one  or  two  districts  out 
of  the  eight  into  which  the  State  was  divided,  but  each  of  the 
thirty-three  judges  who  composed  those  eight  courts  exercised 
throughout  the  State  the  extensive  and  delicate  powera  of  a 
chancellor.  All  were  magistrates  of  co-ordinate  powers,  and 
technically  of  one  court  ;  an  order  made  by  one  could  be  dis- 
solved by  another,  an  officer  appointed  by  this  magistrate 
could  be  su.spcnded  in  the  exercise  of  his  duties  b^-  that,  what 


158  AN   ERIE   RAID. 

one  justice  could  do  the  next  could  undo.  Everything  luider 
such  a  system  depended  on  judicial  respect  for  judicial  action  ; 
courtesy  and  confidence  were  the  essence  of  it.  All  these 
had,  in  certain  quarters,  now  long  passed  away.  The  judges 
of  the  country  had  felt  bitterly  the  discredit  brought  upon 
the  common  bench  by  the  action  of  more  than  one  judge  in  the 
city  ;  there  were  among  them  those  who  had  been  deeply  mor- 
tified by  a  contemptuous  disregard  of  their  process.  Hence  a 
conflict  had  become  inevitable,  and  nowhere  was  it  so  likely 
to  arise  as  out  of  the  litigations  originating  with  the  managers 
of  the  Erie  Railway,  A  peculiar  discredit  had  now  long  at- 
tached to  these,  and  certain  names,  both  on  the  bench  and  at 
the  bar,  were  always  associated  with  them.  There  are  facts 
which  are  of  public  notoriety ;  the  community  recognizes 
them  and  no  justice  can  ignore  them.  When,  therefore, 
James  Fisk,  Jr.,  was  appointed,  as  a  matter  of  course,  by 
Judge  Barnard,  receiver  of  a  railway,  no  part  of  which  lay 
within  a  hundred  miles  of  that  magistrate's  judicial  district, 
and  when  this  appointment  was  made  on  the  eve  of  a  con- 
tested election  for  directors  of  that  railway,  and  must  havo 
l)een  decisive  of  the  contest,  then,  at  last,  a  case  was  presented 
which  could  not  be  ignored.  The  conflict  was  not  likely  to  bo 
a  pleasant  one.  Recent  proceedings  in  other  causes  had  indi- 
cated with  sufficient  clearness  the  lengths  to  which  certain  jus- 
tices of  the  first  district  were  not  indisposed  to  go.  Neither 
the  scandal  certainly  involved,  nor  the  defeat  not  unlikely  to 
ensue,  were  pleasant  to  contemplate  ;  but  the  stand  must  be 
made.  C!ircumstances  had  already  designated  Judge  Pcckham, 
of  Albany,  as  tiic  magistrate  to  whom  the  Ramsey  people  must 
almost  necessarily  have  recourse.  The  public  estimation  in 
which  this  gentleman  is  held  was  shown  by  his  election,  shortly 
after  the  events  here  narrated  took  place,  as  one  of  the  new 
Court  of  Appeals  organized  under  the  judiciary  clatise  of  the 
rejected  Constitution  of  18G9.  The  scandal  which  arose  out 
of  the  Alliany  ife  Sus(|uehanna  case  most  materially  contributed 
to  the  adoption  of  this  single  clause.  It  is  probable,  there- 
fore, that  the  action  of  Judge  Peckham  on  this  occasion  had  a 


AN   ERIK   RAID.  159 

direct  influence   on   his  own   future  eleviition ;    it   certainly 
received  the  public  indorsement. 

Keceiver  Fisk  might  coutidently  be  expected  back,  well 
armed  with  injunctions  and  with  the  original  of  his  writ  of  as- 
sistance on  Monday  morning.  It  was  necessary  that  Receiver 
Pruyn  should  be  prepared  to  meet  him.  The  last  New  Yo»-k 
suit  had  enjoined  the  Albany  receiver  from  any  interference 
with  the  New  York  receivei-s,  and  had  been  accompanied  by  a 
writ  of  assistance.  This  was  now  met  in  the  usual  way.  A 
new  Albany  suit  enjoined  the  New  York  receiver  from  any 
interference  with  Mr.  Pruyn,  and  at  the  same  time  an  order 
was  issued  by  Judge  Peckham  restraining  the  sheriffs  from 
taking  any  action  under  the  writs  «f  assistance.  It  Avas  fur- 
ther sought  to  punish  Mr.  Fisk  for  a  contempt  of  court  in 
interfering  with  its  receiver  on  the  previous  Saturday,  but  this 
the  judge  held  it  necessary  to  send  to  a  referee  to  take  evi- 
dence and  report.  A  temporary  injunction  was  granted,  and 
Mr.  Fisk  was  ordered  to  appear  and  -show  cause  on  the  13th 
why  this  should  not  be  made  permanent.  Such  were  the  legal 
complications  encountered  by  Mr.  Fisk  on  his  return  to  the 
scene  of  his  labors  early  on  Monday  morning.  He  had  left 
New  York  on  the  boat  the  evening  before,  in  company  with  fif- 
teen friends  and  advisers,  and  was  fully  prepared  for  vigorous 
operations.  The  condition  of  affairs  did  not  look  propitious. 
He  was  distinctly  checkmated  at  Albany,  and  the  order  check- 
mating him,  and  forbidding  the  sheriffs  to  interfere  to  put  him 
in  possession,  was  already  on  the  express-train  which  had  left 
Albany  at  8  A.  M.,  and  would  be  due  in  Binghamton,  at 
the  other  end  of  the  coveted  road,  at  three  o'clock  that  after- 
noon. A  party  to  a  conflict,  however,  who  operates  by  steam, 
i!i  at  a  manifest  disadvantage  when  acting  against  one  who 
despatches  writs  by  telegraph.  In  the  present  case  Mr.  Fisk, 
baffled  at  one  end  of  the  line,  went  vigorously  to  work  a  hun- 
dred and  forty  miles  away  at  the  other  end  of  it.  AVhile  the 
express-train  was  toiling  along  to  Binghamton,  enjoining  as 
it  went  all  sheriffs  and  others  from  paying  any  attention  to  his 
WTits  of   assistance,   the   telegi'aph   was  flashing   those   writs 


160  AN    ERIE   RAID. 

direct  to  Binghamton,  and  commanding  that  immediate  pos- 
session should  be  given  to  his  representatives.  Accordingly 
just  before  two  o'clock,  and  sis  the  afternoon  train  for  Albany 
was  on  the  point  of  leaving  Binghamton,  the  sheriff  of  Broome 
County  made  his  appearance,  and,  by  virtue  of  a  writ  of  Judge 
Barnard's,  fresh  from  the  telegraph  wires,  proceeded  to  take 
possession  of  all  the  property  of  the  Albany  &  Susquehanna 
Eailroad  Co.,  including  the  train  then  standing  at  the  station. 
Three  locomotives  belonging  to  the  same  company  were  also 
at  Binghamton.  These  he  undertook  to  seize  next ;  of  two 
of  them  he  obtained  possession,  but  the  agent  of  the  road  was 
before  him  with  the  third ;  for,  just  as  he-  was  approaching  his 
prey,  writ  in  hand  and  borne  upon  one  locomotive,  the  in- 
genious employee  switched  him  off,  and,  while  his  own  path 
suddenly  led  into  space,  he  saw  his  prize  gently  slide  down 
the  grade  out  of  his  reach,  and  there  get  up  the  steam  neces- 
sary to  make  good  its  escape. 

The  Barnard  receivers  were  thus  fairly  installed  in  posses- 
sion of  the  Binghamton  end  of  the  road,  of  the  point  where 
it  connected  with  the  Erie.  An  assistant  superintendent  of 
the  Erie  Railway  was  at  once  appointed  superintendent  of  the 
Albany  «k  Susquehanna,  and  a  conductor  of  the  same  road 
was  ordered  to  take  out  the  regular  train  to  Albany,  which 
was  still  standing  at  the  platform  where  it  was  seized.  Mat- 
ters were  evidently  approaching  a  crisis.  Different  sets  of 
receivers  were  operating  the  two  ends  of  the  road,  and  two 
sheriffs,  bearing  conflicting  i)rocesaes,  were  rapidly  approach- 
ing each  other  on  trains  drawn  by  the  locomotives  and  directed 
by  the  officers  of  the  hostile  factions.  This  condition  of  af- 
fairs was  telegi'aphed  to  the  Ramsey  train  at  Harpersvillc, 
twent^'-fivc  miles  from  Binghamton,  and,  after  some  consid- 
eration, it  was  determined  to  proceed  no  fartlier.  Meanwhile 
the  news  of  the  Binghamton  proceedings  caused  Superin- 
tendent Van  Valkenburg  to  decide  on  vigorous  measures.  In 
the  first  place  he  proceeded  to  clear  the  offices  of  all  hostile 
influences.  Mr.  Fisk  had  not  that  day  been  allowed  within 
the  premises.     Repeatedly,  in  coni])any  with  the  sheriff  and 


AN   ERIE   RAID.  161 

others,  had  he  presented  himself  and  energetically  demanded 
admission.  It  was  of  no  avail.  It  was  different  with  Mr. 
Courter,  his  fellow-receiver ;  he  had  been  treated  with  a  de- 
gree of  courtesy,  and  indeed  had  been  permitted  to  sustain 
the  character  of  a  nominal  receiver  within  the  offices.  This 
gentleman  was,  however,  now  notified  by  Mr.  Van  Valkenburg 
that  the  farce  of  a  double  possession  was  to  terminate  then 
and  there.  On  Saturday,  in  the  little  unpleasantness  with 
Mr.  Fisk,  Van  Valkenburg  had  given  some  indications  that  he 
was  a  man  of  few  words  and  decided  action.  The  hint  had 
not  been  thrown  away.  Mr.  Courter,  after  a  formal  resistance 
just  sufficient  to  establish  the  fact  of  foi-cible  ejectment,  with- 
drew from  the  premises,  and  the  Barnard  i-eceivers  abandoned 
every  pretence  of  actual  possession  of  the  Albany  end  of  the 
line.  Van  Valkenburg's  next  move  was  to  telegraph  an  order 
over  the  road,  stopping  every  train  where  it  then  was;  all 
movement  was  thus  brought  to  a  stand.  An  extra  train,  car- 
rying a  hundred  and  fifty  men  from  the  workshops,  under 
command  of  the  master  mechanic,  was  then  sent  up  the  road 
to  be  ready  for  any  emergency.  Having  thus  cleared  every- 
thing away  for  action,  the  next  move  of  the  other  side  was  in 
order.. 

The  representatives  of  this  other  side  were  meanwhile  ad- 
vancing from  the  opposite  direction ;  upon  the  train  were  the 
sheriff  of  Broome  County,  the  Erie  superintendent  of  the  road, 
and  some  twenty  men.  As  they  moved  along,  the  orders 
of  Judge  Baniard  were  served  at  each  way  station,  the  old 
officials  of  the  road  were  displaced,  and  Erie  men  were  sub- 
stituted for  them.  So  eager,  indeed,  was  the  sheriff  in  the  dis- 
charge of  his  duties,  under  the  electro-writ  of  assistance,  that 
he  not  only  served  an  order,  the  illegal  character  of  which  he 
must  have  more  than  suspected,  throughout  his  own  county, 
but  he  continued  to  do  so  throughout  the  adjacent  county, 
and,  indeed,  seemed  not  indisposed  to  extend  his  bailiwick  to 
Albany.  At  Afton,  about  thirty  miles  from  Binghamton,  a 
despatch  was  received  from  Mr.  Van  Valkenburg,  notifying 
the  party  that  any  farther  advance  would  be  at  its  own  peril. 


162  AN   ERIE   RAID. 

The  Albany  people  were  then  lying  at  Bainbridge,  six  miles 
farther  down  the  track.  After  some  hesitation,  which  involved 
a  great  deal  of  rapid  telegraphing  and  no  inconsiderable  delay, 
positive  orders  for  an  advance  came  to  the  Erie  party,  followed 
shortly  after  by  reinforcements.  It  was  now  deep  in  the 
night,  but  the  train  at  last  was  started,  and  moved  slowly  and 
cautiously  towards  Bainbridge.  The  Albany  party  was  pre- 
pared to  receive  it.  They  lay  on  a  siding,  with  a  patent 
frog  —  a  little  machine  made  to  slide  trains  on  to  the  rails, 
but  equally  calculated  to  slide  them  off —  attached  at  a  con- 
venient point  to  the  main  track.  In  total  ignorance  of  this 
bit  of  strategy,  the  Erie  people  felt  their  way  along,  when,  just 
as  Bainbridge,  to  their  very  great  relief,  seemed  safely  reached, 
their  locomotive  gently  and  suddenly  glided  off  the  track,  and 
their  train  was  brought  to  a  stand-still.  The  instant  this  took 
place  the  Albany  train  moved  up  the  siding,  passed  triumph- 
antly by  its  disabled  opponents  and  on  to  the  main  track 
above  them,  where  it  took  its  position  in  their  rear,  effectually 
cutting  off  all  retreat.  As  the  P^rie  party  tumbled  out  of  their 
train,  they  were  met  by  Mr.  Smith,  one  of  the  counsel  of  their 
opponents,  who  glanced  at  the  process  under  which  they  were 
acting,  and  at  once  pronounced  it  worthless.  There  was  no 
alternative ;  they  had  fallen  into  a  trap,  unconditional  sur- 
render was  all  that  remained.  This  was  accordingly  submitted 
to,  aiid  Sheriff  Browne  of  Broome  County,  and  all  his  pnsae 
comilatus,  were  helped  off  their  train  and  duly  served  with  the 
order  of  Judge  Peckham,  restraining  them  from  doing  or  at- 
tempting anything  in  aid  of  the  receivers  appointed  by  Judge 
Barnard. 

Having  disposed  of  this  little  party  by  capture,  and  it  being 
now  liroad  day,  the  Ramsey  commander  decided  vigoi-ously  to 
follow  up  his  advantage,  steaming  up  the  road  towards  Bing- 
hamton.  On  the  way  he  disjilaced  the  recently  appointed 
Fisk  men,  and  replaced  the  ejected  Ramsey  nien  in  charge 
of  the  various  stations,  tlverything  proceeded  well  until  the 
train  approached  the  long  tunnel,  near  Binghamton.  This 
was  the  battle-gi'ound  chosen  by  the  Erie  party.     Here,  close 


AN   KRIK    RAID.  163 

to  their  base  of  operations,  and  near  their  supplies,  they  had 
massed  their  reserves,  after  the  total  and  ignominious  capture 
of  their  advance  guard. 

The  tunnel  is  some  twenty-two  hundred  feet  in  length,  and 
is  about  fifteen  miles  from  Binghamton.  It  marks  the  last 
summit  the  road  crosses  in  going  west,  and,  on  either  side,  is 
approached  by  a  heavy  Jiscending  gTade  and  round  a  sharp 
curve.  The  Albany  party  arrived  at  this  point  at  about  ten 
o'clock,  and  here  halted.  On  the  other  side  of  the  hill,  trains 
were  bringing  up  workmen  from  the  Erie  shops,  under  the 
officere  of  the  Erie  road,  until  Mr.  Fisk's  threat  in  regard  to 
"  any  number  of  men  "  seemed  tolerably  certain  to  be  verified. 
It  was  a  motley  collection,  the  control  of  which  must  have 
considerably  puzzled  the  general  superintendent  of  the  Erie 
Railway,  who  found  himself  in  conimand.  A  more  unwieldy 
body  could  not  well  have  been  got  together.  The  men  were 
wholly  unarmed,  except,  perhaps,  with  sticks,  which  one  party 
was  detailed  to  cut  in  the  neighboring  woods  ;  they  had  been 
hastily  summoned  from  the  shops,  and  were  ignorant  as  chil- 
dren of  the  crazy  errand  they  were  about,  nor  had  they  the 
slightest  enmity  towards  those  opposite  to  whom  they  stood  in 
ludicrous  array.  This,  however,  was  not  the  case  with  the 
Susquehanna  people.  They  were  now  thoroughly  stirred  up 
and  ready  for  anything.  Most  of  them  had  for  years  been  in 
the  employ  of  the  road,  and  many  were  personally  attaclied  to 
Mr.  Ramsey  ;  they  regarded  the  effort  to  dispossess  him  as 
aimed  also  at  themselves.  They  were,  too,  flushed  with  the 
8UCCH3SS  at  Baiubridge,  and  possessed  with  a  strong  esprit  de 
corps.  Such  being  the  opposing  elements,  they  lay  waiting 
for  peremptory  orders,  which  in  any  case  had  to  come  from 
Albany,  for  there  both  Fisk  and  Van  Valkenburg  kept  their 
head-quarters.  From  time  to  time  reinforcements  came  up, 
imtil  by  seven  o'clock  the  Erie  party  was  raised  to  an  un- 
wieldy mob  of  some  eight  hundred  men,  while  their  opponents 
numbered  hardly  less  than  four  hundred  and  fifty.  The  Erie 
people  now  decided  to  try  an  advance,  and  accordingly  a  train 
well  loaded  with  combatants  was  set  in  motion.     It  moved 


1G4  AN   ERIE   RAID. 

slowly  througn  the  tunnel  and  emerged  safely  from  the  east- 
ern end,  merely  having  to  replace  a  single  rail.  This  done, 
the  advance  was  continued.  Meanwhile  the  Albany'  people 
were  fully  notified  of  the  impending  danger.  Accordingly, 
when  the  Erie  people  had  replaced  the  rail  and  started,  they 
started  too,  and  thus  the  first  intimation  the  raiders  had  of 
danger  was  the  discovery,  on  rounding  the  sharp  curve,  of  an 
approaching  locomotive,  angrily  puffing  up  the  grade,  and 
apparently  bent  on  mischief.  This  was  more  than  they  were 
prepared  for.  Their  whistle  at  once  signalled  danger,  which 
the  Albany  locomotive  replied  to  by  signalling  to  theni  to  get 
out  of  the  way.  In  vain  the  Erie  conductor  jumped  off  his 
train  and  gesticulated  like  a  madman ;  in  vain  the  Erie  engi- 
neer tried  to  back  out  of  the  way  ;  the  curs^e  was  here  so 
sharp  and  the  incline  up  which  it  was  necessary  to  back  in 
order  to  return  into  the  tunnel  was  so  great,  that  it  was  in- 
stantly evident,  not  only  that  the  Albany  people  wanted  a 
collision,  but  that  their  wish  was  to  be  gratified.  Though  the 
Erie  engine  could  not  reverse,  it  had  stopped,  and  the  heavy 
grade  kept  down  the  speed  of  the  Albany  train,  so  that  the 
collision  leather  indicated  an  animus  than  inflicted  an  injury ; 
nevertheless,  in  a  moment  the  two  locomotives  came  together 
"with  a  sharp  shock.  The  damage  done  wjxs  not  great ;  guards 
and  cow-catchers  were  swept  away,  head-lights  were  broken, 
and  the  attacking  locomotive  was  roughly  thrown  from  the 
track  ;  but  the  collision  of  engines  was  the  signal  for  a  collision 
of  men.  Before  the  trains  had  met  they  wwe  emptied  of  their 
loads.  Such  a  system  of  opposition  was  something  on  which 
the  Erie  people  had  not  counted,  and  when,  simultaneously 
with  the  collision,  the  Albany  men  rushed  upon  them  with 
loud  shouts,  they  were  at  once  completely  demoralized,  and 
broke  into  a  precipitate  flight.  Their  locomotive,  with  broken 
lights  and  a  pistol-bullet  through  its  cab,  vigorously  reversed, 
until  it  had  reversed  itself  out  of  the  melee  and  back  into  the 
tunnel,  while  they  themselves  took  to  their  heels  and  scam- 
pered back  towards  Binghamton.  A  few  remained  on  Ixjard 
the  train,  a  few  stumbled  back  through  the  darkness  of  the 


AN   ERIE   RAID.  1G5 

tunnel,  but  the  greater  part,  to  whona  their  terror  perhaps 
lent  wings,  scaled  the  mountain  like  a  sand-hill  in  their  flight. 

Victory  had  again  rested  on  the  Albany  banners;  the  Ram- 
sey star  was  in  the  decided  ascendant.  While  one  party  of  the 
Albany  men  followed  up  the  disorganized  enemy,  others  busied 
themselves  in  getting  the  locomotive  on  the  track.  This 
was  soon  done,  and  then  they,  in  their  turn,  locomotive  and 
all,  advanced  through  the  tunnel  to  complete  the  rout  of  Erie. 
The  last-named  party  had,  however,  rallied  a  little  in  the 
breathing-time  aftbrded  them,  and  were  now  at  least  equal  to 
the  task  of  making  a  very  considerable  noise.  This,  it  is  true, 
was  not  much,  but  in  the  growing  darkness  it  was  enough. 
In  fact  it  might  be  said  that  one  party  was  afraid  to  go  for- 
ward, and  the  other  did  not  dare  to  attack.  The  element  of 
the  ludicrous  was  becoming  very  pronounced,  notwithstanding 
the  earnestness  of  the  combatants.  Thus,  as  the  shades 
of  night  deepened,  they  stood  apart  and  defied  each  other 
with  loud  shouts  and  excessive  profanity.  A  few  conflicts 
of  the  more  daring,  a  few  scattering  pistol-shots,  a  few  wounds, 
none  of  them  serious,  told  the  whole  story.  Yet  it  was  a  riot, 
and  a  shockingly  lawless  one ;  nay,  more,  it  was  an  alarming 
one.  It  was  not  a  sudden  fight  between  ignorant  and  angry 
mobs ;  it  was  the  attempt  of  tw^o  great  corporations  to  levy 
war  on  each  other  with  organized  force.  How  far  it  might 
have  gone  cannot  be  said,  for,  in  the  midst  of  the  tumxdt,  the 
drums  of  the  Forty-fourth  Regiment  of  State  Militia  were 
heard  approaching,  and  at  this  not  unwelcome  sound  the  com- 
batants desisted.  The  Erie  people  held  possession  of  the  field. 
The  Albany  party  sullenly  withdrew,  locomotive  and  all, 
through  the  tunnel,  which  they  blocked  up  with  a  freight- 
car,  and  then,  after  breaking  down  a  trestle-work  or  two,  with 
a  view  of  preventing  another  attack,  they  retired  to  Harpers- 
ville,  where  they  established  themselves  for  the  night. 

Meanwhile  the  whole  State  was  in  an  iiproar  over  the  scan- 
dal of  these  lawless  acts.  All  along  the  line  of  the  road,  and 
indeed  almost  everywhere,  the  feeling  was  strongly  in  sympa- 
thy with  Mr.  Ramsey.     It  could  not  well  be  otherwise  ;  with- 


166  AN   KRIE   RAID. 

out  knowing  anything  of  the  circumstances  of  the  particular 
case,  a  strong  presumption  was  now  inevitable  wherever  the 
Erie  management  made  its  appearance  in  any  complication. 
At  Albany  the  public  sentiment  was  peculiarly  strong  ;  meet- 
ings were  held,  a  perfect  ovation  greeted  the  arrival  of  the 
runaway  locomotive  from  Binghamton  and  the  captured  Erie 
train ;  crowds  collected  round  the  station,  and  were  addressed 
from  the  cars  by  city  demagogues  on  their  way  "  to  the  front." 
At  last,  also,  the  point  was  reached  at  which,  if  the  authorities 
did  not  interfere,  the  people  would  organize  and  take  mattei-s 
into  their  own  hands.  The  militia  had  already  been  called 
upon  by  the  civil  authorities  of  Broome  County  and  hjvd  re- 
sponded to  the  call,  and  now  Governor  Hoffman  was  recalled 
from  his  summer  sojourning-place  by  telegraph,  and  reached 
Albany  at  almost  the  very  time  that  the  Forty-fourth  Regi- 
ment arrived  at  the  scene  of  riot.  He  at  once  took  decisive 
measures.  Orders  were  telegraphed  to  the  sheriffs  along  the 
line  of  the  road,  directing  them,  in  all  cases  of  doubt,  to  treat 
any  party  in  actual  possession  under  a  judicial  order  as  being 
in  rightful  possession.  The  military  were  to  be  called  upon 
only  in  case  of  extreme  emergency,  but,  if  the  disorders  con- 
tinued, the  whole  district  was  to  be  placed  under  martial 
law. 

In  spite  of  these  new  developments,  the  Erie  party  was 
neither  discouraged  nor  idle.  The  papers  of  Tuesday  con- 
tained a  long  letter  from  Mr.  James  Fisk,  Jr.,  setting  forth  at 
great  length  the  magnitude  of  the  public  interests  for  which  ho 
claimed  to  be  contending.  The  literary  shortcomings  of  this 
production  were  excused  on  the  ground  of  "  quick,  sharj)  work 
on  a  stamping  ground  new  to  me."  Not  content  with  this  bid 
for  moral  support,  on  the  evening  of  Tuesday,  when  the  oftices 
of  the  company  would  naturally  have  been  deserted,  Fisk  and 
Courter  made  another  effort  to  obtain  possession  of  them. 
Armed  with  an  order  of  Judge  Barnard's,  staying  all  proceed- 
ings under  Judge  Pcckham's  writ  of  Monday,  and  further  forti- 
fied with  an  additional  writ  of  assistance,  the  brother  receivers 
made  their  appearance  in  a  carriage  accompanied  by  the  sher- 


AN  EKir:  KAID.  1G7 

if^  Vail  Valkenburg  was,  however,  on  the  ground,  and,  for  a 
moment  or  two,  thing's  had  an  unpleasant  look  ;  so  unpleasant, 
indeed,  that  Mr.  Fisk  now  changed  his  tactics.  Instead  of 
bullying  he  attempted  bribing ;  all  the  braggart  confidence 
of  Saturday  was  gone,  and  his  demeanor  was  chiefly  marked 
by  an  excessive  care  for  his  personal  safety.  As  for  the  sheriff, 
the  indications  of  violence  were  sufficiently  pronounced  to 
induce  him  to  think  it  inexpedient  to  proceed  further.  Prob- 
ably they  would  have  gone  away  empty-handed,  had  not  a 
new  judicial  power  just  then  stepped  into  the  arena.  This 
was  Mr.  Justice  Clute,  of  the  Albany  County  Court,  who 
issued  his  order  directing  the  arrest  of  the  Barnard  receivers 
for  conspiring  to  take  possession  of  the  Albany  &  Susquehanna 
Railroad  by  force  of  arms.  In  obedience  to  this  order  the  two 
indignant  receivers  were  at  once  taken  to  Judge  Clute's  office, 
whence  they  were  not  released  until  they  gave  bail  for  their 
appearance  next  morning.  The  oo«/)  cle  main  was  a  failure  ; 
but  Mr.  Fisk  relieved  his  feelings  by  graphically  describing 
the  attempts  which  had  been  made  to  assassinate  him. 

The  next  morning  Judge  Peckham  began  the  day,  not 
exactly  by  setting  aside  his  brother  Barnard's  recent  orders, 
but,  more  courteously,  by  fixing  a  day  on  which  cause  should 
be  shown  why  they  should  not  be  vacated,  and,  meanwhile, 
granting  a  temporary  stay  of  all  proceedings  under  them. 
The  judicial  equilibrium  was  thus  restored.  At  last  Governor 
Hoffinan  put  a  final  stop  to  the  judicial  farce  by  notifying  the 
sheriff  of  Albany  that  he  was  included  in  the  directions  of  the 
previous  day.  The  Ramsey  party,  being  in  actual  possession 
at  Albany  under  a  judicial  order,  forthwith  applied  to  the 
police  for  protection,  which  was  immediately  granted  them. 
Meanwhile,  Governor  Hoffman  received  information  of  the 
tunnel  conflict.  He  at  once  notified  the  counsel  that  such 
proceedings  must  stop,  and  that  some  agreement  must  be 
arrived  at.  In  due  time  the  counsel  notified  the  Governor, 
in  reply,  that  they  were  utterly  unable  to  agree  on  anything. 
His  Excellency  thereupon  very  emphatically  and  very  properly 
replied  that  he  neither  knew  nor  cai^d  anything  for  their  com- 


108  AN  ERIE   RAID. 

plications,  but  he  did  propose  to  preserve  the  public  pea^e. 
If  those  interested  could  not  agree  on  some  other  course,  it 
only  remained  for  him  to  declare  the  whole  district  in  a  state 
of  insurrection,  and  to  operate  the  road  as  a  military  one. 
This  declaration  produced  a  document,  signed  by  all  the  re- 
ceivers, requesting  his  Excellency,  as  a  species  of  nondescript 
superintendent,  mutually  agreed  upon,  to  take  possession  of 
and  operate  the  road.  This  very  anomalous  trust  was  ac- 
cepted by  Governor  Hoffman,  who  issued  a  quasi  military 
order,  detailing  Inspector-General  McQuade  as  his  deputy 
superintendent,  and  directing  him  to  take  possession.  This 
was  certainly  a  fitting  climax  to  all  that  had  gone  before.  A 
receiver  is  an  oflScer  of  the  court.  His  possession  is  the  pos- 
session of  the  court.  The  courts  in  this  case  were  fighting 
over  the  control  of  a  railroad,  and  were  forced  to  ask  the 
Executive  to  hold  the  bone  of  contention  while  the  judiciary 
"  had  it  out "  amongst  themselves.  Thus  the  Executive,  in 
the  utter  break-down  of  the  law,  had  to  accept  a  trust  which 
did  not  belong  to  it,  and  proceed  to  perform  duties  which  it 
had  no  right  to  perform,  under  an  authority  conferred  by  cer- 
tain persons  who  had  no  such  authority  to  confer.  And  all 
this  because  a  man  was  selected  in  caucus  and  elected  at  the 
polls  a  judge  in  the  first  judicial  district  of  New  York,  who 
fairly  represented  the  moral  and  intellectual  level  of  the  major- 
ity of  the  voters  who  had  elevated  him  into  infamy.  It  was 
no  accident ;  there  was  no  element  of  chance  in  the  case ;  it 
was  the  working  of  a  system  which  produced  a  logical  and 
natural  result. 

Though  the  possession  of  the  road  was  thus  disposed  of,  cer- 
tain little  outstauding  accounts  remained  to  be  adjusted.  The 
vacating  of  Judge  Peckham's  orders  by  Judge  Barnard,  and 
the  staying  of  proceedings  under  Judge  Barnard's  orders  by 
Judge  Peckham,  were  matters  of  too  common  occurrence  to 
call  for  notice.  The  interference  of  Judge  Clute,  however,  a 
mere  county  judge,  was  something  "  most  tolerable  and  not  to 
be  endured."  And  now  for  the  first  time  in  these  proceedings 
Judge  Barnard  appeared  upon  the  stage  as  something  more 


AN   ERIE   RAID.  169 

than  a  name.  The  funeral  of  his  mother  had  taken  place  at 
Poughkeepsie  on  the  previous  day  ;  on  that  day,  also,  orders 
had  been  forthcoming  from  him  in  these  Susqnehanna  suits, 
purporting  to  be  granted  on  the  behest  of  Mr.  Shearman,  be- 
tween 11  A.  M.  and  1  P.  M.,  at  special  term  at  the  court- 
house in  New  York  City.  The  minutes  of  the  court-house  show 
that  the  special  term  at  the  court-house  in  New  York  City  was 
held  on  this  day  by  another  magistrate.  Upon  the  morning  of 
the  11th,  however,  he  at  length  appeared  in  proper  person,  and, 
after  obtaining  from  him  the  usual  order,  setting  aside  Judge 
Peckham's  action  of  the  day  before,  Mr.  David  Dudley  P^ield, 
of  counsel  for  the  Erie  Railway,  read  to  the  court  the  return 
of  the  sheriff,  setting  forth"  the  resistance  he  had  encountered 
on  the  previous  afternoon  in  his  attempt  on  the  Susquehanna 
offices.  Upon  his  motion  the  court  ordered  a  peremptory  WTit, 
not  bailable,  to  issue,  commanding  the  sheriff  to  aiTest  Messrs. 
Pruyn,  Ramsey,  and  Van  Valkenburg,  and  to  produce  their 
bodies  in  court  without  delay.  Under  this  process  these  gen- 
tlemen were  arrested  that  afternoon,  while  in  the  Executive 
Chamber,  and  were  held  in  duress  awaiting  conveyance  to 
New  York.  Of  course  they  none  of  them,  at  this  time,  seri- 
ously contemplated  any  such  journey.  Recourse  was  sigain 
had  to  Judge  Clute,  and  the  non-bailable  prisoners  were  car- 
ried before  that  magistrate  on  a  habeas  corpus.  The  subject 
was  taken  under  consideration  by  him  imtil  next  morning. 
The  opponents  of  Mr.  Fisk  had  shown  themselves  not  inapt 
scholars,  and  it  naturally  occurred  to  them  that  processes  for 
contempt  might  be  made  to  apply  to  him  as  well  as  to  them- 
selves. The  same  thought  suggested  itself  to  Mr.  Fisk,  as 
soon  as  he  foiuid  time  to  relax  from  the  efforts  incident  to 
"quick,  sharp  work  on  a  stamping  ground  new  to  him."  He 
had  once  before  fled  to  Jersey  City,  pursued  by  Barnard  ;  he 
now  incontinently  retired  to  New  York,  terrified  by  Peckham. 
In  fact,  he  abandoned  his  new  "  stamping  gi-ound  "  with  great 
precipitation.  Flying  on  board  his  own  steamer,  which  was 
lying  in  the  stream  ready  to  serve  either  as  an  ark  of  refuge 
or  a  stronghold  for  prisoners,  he  was  conveyed  at  once  to  New 
8 


170  AN  ERIK   RAID. 

York,  where  he  secured  himself  in  the  recesses  of  Castle 
Erie. 

The  next  morning  Judge  Clute  incontinently  dischai'ged  the 
prisoners  held  under  Judge  Barnard's  writ.  It  is  almost 
unnecessary  to  say  that  his  action  was  apparently  in  disregard 
of  law  ;  these  proceedings  throughout  wei'e  open  to  this  criti- 
cism. It  was  perfectly  proper  for  Judge  Clute  to  issue  his  writ 
of  Jiabeas  corpus  ;  when  it  came,  however,  to  releasing  prison- 
ers held  by  a  sheriff  on  a  writ  issued  for  contempt  from  a 
court  superior  to  his  own,  the  action  of  his  Honor  was,  per- 
haps, more  spirited  than  correct  in  practice.  The  prisoners, 
however,  were  released,  and  it  only  remained  for  the  sheriff  to 
make  a  return  of  the  facts  by  mail  to  Judge  Barnard.  The 
matter  was  then  brought  once  more  before  that  magistrate, 
this  time  by  Mr.  Shearman.  The  colloquy  that  then  took 
place  was  characteristic  and  well  calculated  to  fill  with  terror 
the  hearts  of  Peckham  and  Clute,  no  less  than  of  Pruyn  and 
Ramsey.  The  counsel  began  with  a  comparison.  Judge  Peck- 
ham,  it  appeared,  had  signed  certain  of  his  orders  at  his  office ; 
Judge  Barnard,  it  will  be  remembered,  wiis  supposed  to  have 
signed  his  somewhere  in  the  immediate  neighborhood  of  a 
theatre.  Bearing  these  facts  in  mind,  one  cannot  but  appre- 
ciate the  delicate  sense  of  honor  implied  in  the  following  open- 
ing remark  of  the  counsel :  "  Unlike  our  opponents,  who  in- 
vite the  judge  to  their  private  office,  and  from  which  he  issues 
his  orders  as  if  from  the  court,  we  have  never  sought  to  con- 
sult your  Honor  in  private,  and  whatever  we  have  asked  has 
been  asked  openly  in  court,  and  in  accordance  with  our  firm 
conviction  of  our  legal  rights."  The  peculiarly  elevated  tone 
of  Judge  Barnard's  court  being  thus  established,  the  colloquy 
proceeded  as  follows  :  — 

Jvdge  Barnard.  I  have  been  looking  into  this  matter  with 
some  degree  of  care,  and  am  of  opinion  that  J.  H.  Clute,  sign- 
ing himself  as  county  judge  of  Albany  County,  entertained 
jurisdiction  of  this  matter  as  a  criminal  contempt,  well  know- 
ing that  it  was  a  civil  contempt.  I  am  not  quite  sure  but  he 
(should  be  brought  before  me  to  be  punished  for  contempt. 


AN   ERI1-:   RAID.  171 

Mr.  Shearman.  I  intend  to  follow  these  men  as  I  have 
followed  others.  Four  months  ago  we  were  in  pursuit  of  cer- 
tain ptuties,  and  they  were  finally  overtaken  as  their  coat-tails 
were  disappearing  behind  a  safe.  I  shall  follow  these  men, 
if  it  is  necessary  and  possible,  to  the  end  of  time. 

Jtuhje  Barnard.  1  have  some  years  to  sit  on  this  bench, 
and  would  as  soon  devote  them  to  this  as  to  anything  else. 

Mr.  Sliearman.  I  am  a  young  man  also,  having  perhaps 
forty  years  at  my  disposal,  and  I  am  willing  to  devote  them  all 
to  the  pursuit  of  these  men. 

The  first  step  in  this  forty  years  of  pei'sistent  strife  was 
thereupon  at  once  taken  by  directing  the  sheriff  to  make  a 
more  detailed  return.  The  individuals  in  question  had,  how- 
ever, already  fled  the  State,  and  Judge  Barnard  does  not  seem 
finally  to  have  made  up  his  mind  to  try  conclusions  with 
Judge  Clute.  Meanwhile  the  friends  of  the  fugitives  began  to 
think  that  these  proceedings  had  exceeded  the  limits  of  a  jest. 
To  fly  the  State  was  an  ignominious  thing ;  it  seemed  to  imply 
a  confession  of  wrong-doing ;  it  could  only  be  justified  by  the 
uncertainty  which  existed  in  regard  to  the  limits  of  jiidicial 
power  in  cases  of  contempt,  and  especially  of  the  exercise  of 
that  power  by  Barnard  himself.  He  had  indicated  his  animus 
by  his  remarks  in  court.  Resort  was  had  to  negotiation.  ■  One 
of  the  Ramsey  counsel  went  to  New  York  and  threw  himself  in 
Barnard's  way.  The  Judge  assured  him  that  there  was  no  vin- 
dictiveness  in  his  mind,  and  this  interview  led  finally  to  some 
distinct  undeT"standing,  reassured  by  which  the  fugitives  one 
by  one  came  back  and  presented  themselves  in  court.  After 
this  the  matter  took  the  usual  course.  A  reference  was  ordered, 
a  mass  of  evidence  was  taken,  the  case  dragged  its  slow  length 
along,  bail  was  reduced,  a  multiplicity  of  orders  were  issued, 
the  wrath  of  Barnard  gradually  subsided,  and,  at  hist,  the  bat- 
tle of  the  judges  died  away  in  a  faint  rumble  of  evidence,  affida- 
vits, explanations,  and  orders,  and  then  was  heard  of  no  more. 

One  further  order,  and  one  only,  was  made  at  about  this 
time,  to  which  subsequent  events  lent  a  deep  consequence. 
The  Erie  party  had  been  completely  foiled  in  its  efforts  to  get 


172  AN  ERIE   RAID. 

possession  of  tlie  much-coveted  books.  Now  and  again  they 
would  obtain  some  clew  which  led  them  to  suspect  their  pres- 
ence somewhere,  but  when  they  were  sought  they  were  gone. 
Agents  went  out  of  the  State  hunting  for  them,  parties  were 
examined  in  the  State  concerning  them ;  a  strange  ignorance 
apparently  existed  as  to  their  whereabouts.  They  seemed 
ubiquitous  ;  at  one  time  in  Albany,  at  another  in  Pittsfield, 
and  then  suddenly  in  Troy  ;  but  always  in  the  undisturbed 
possession  of  some  friend  of  Mr.  Ramsey.  The  Erie  party 
was,  in  their  absence,  wholly  unable  to  estimate  its  own  rela- 
tive strength  as  compared  with  that  of  its  opponents.  It  waar 
known,  however,  that  a  portion  of  the  forfeited  stock  had  been 
reissued,  and  now  stood  in  the  names  of  Leonard,  Groesl>eck, 
and  others.  Leonard  was  a  director,  and  in  negotiating  the 
sale  for  the  company  of  certain  of  its  second  mortgage  bonds 
and  stock  had  reserved  to  himself  a  portion  of  the  stock  as  a 
species  of  brokerage  commission.  Mr.  Leonard,  however,  was 
one  of  the  directors  in  close  sympathy  and  alliance  with  the 
Erie  management,  and,  in  regard  to  the  stock  reissued  and  • 
standing  in  his  name,  for  which  in  reality  no  consideration 
had  been  paid  to  the  company,  it  seemed  unnecessary  to  in- 
stitute any  proceedings.  Not  so  as  regarded  that  issued  to 
(Jroesbeck  and  paid  for  by  him.  The  reissue  of  this  last  stock 
was  pronounced  flagrantly  illegal  and  void,  and  Judge  Barnard 
was  accoi-dingly  ])etitioned  to  appoint  a  receiver  for  it.  The 
order  was  innnediately  gi'anted,  and  Mr.  William  J.  A.  Fuller, 
an  individual  who  had  once  been  a  clerk  in  Mr.  Field's  office, 
wjis  named  receiver,  and  directed  to  take  immediate  possession 
of  the  jjroperty.  Armed  with  this  order,  and  accompanied  by 
a  sheriff's  officer,  the  new  receiver  proceeded  at  once  to  Mr. 
Groesbcck's  office  and  demanded  his  scrip.  Upon  Mr.  (iroes- 
beck's  demurring  somewhat  at  being  dejjrived  of  his  property 
in  this  summary  way.  Receiver  Fuller  ])roceeded  to  explain  to 
him  the  mysterious  terrors  of  a  writ  of  assistance,  which 
almost  unknown  ])rocess  he  darkly  intimated  he  had  some- 
where at  liand.  Mr.  Grocsbeck  was  tolerably  familiar  from 
long  exj)erience  with  all  tlic  usual  judicial  processes  which  arc 


AN  ERIE   RAID.  173 

auxiliary  to  New  York  financial  combinations,  but  writs  of  as- 
sistance were  implements  strange  to  him.  The  element  of  the 
imknown  seems  to  have  produced  the  desired  effect,  and  Mr. 
Groesbeck  delivered  to  Mr.  Fuller  certificates  for  nine  hundred 
shares  of  stock.  Under  the  same  authority  this  gentleman 
further  collected  other  certificates  representing  sixteen  hun- 
dred additional  shares.  His  duty  was  simply,  at  the  most, 
to  hold  these  shares  pending  the  result  of  litigation  as  to  the 
legality  of  their  issue  ;  he  subsequently,  as  will  be  seen,  took 
what  may  be  called  very  enlarged  views  of  these  duties.  Both 
parties  had  now  gathered  up  their  strength  for  the  election 
which  was  to  take  place  on  the  7th  of  September. 

It  was  provided  in  the  by-laws  of  the  company  that  the  polls 
should  be  opened  at  twelve  o'clock  on  the  day  of  election,  and 
should  continue  open  for  one  hour  ;  no  transfers  of  shares  were 
to  take  jilace  during  the  thirty  days  next  preceding  the  elec- 
tion ;  three  inspectors  were  provided  for,  to  be  chosen  each 
year  by  the  stockholders ;  it  was  their  duty  to  conduct  the 
election  ;  they  were  to  be  provided  by  ■  the  secretary  with  a 
list  of  stockholders  entitled  to  vote,  and  to  them  also  upon 
that  day  the  transfer  book  was  to  be  submitted.  To  this  state 
of  the  law  and  the  facts  the  two  parties  prepared  to  conform 
their  plans.  It  was  in  the  first  place  incumbent  on  the  Ram- 
sey party  to  restore  the  books  to  the  offices  of  the  company. 
This  was  done  veiy  secretly  on  the  night  preceding  the  elec- 
tion. A  certain  fictitious  consequence  was  sought  to  be 
attached  to  the  way  in  which  this  was  done,  owing  to  the  fact 
that,  when  the  messengers  airived  with  the  books,  instead 
of  finding  everything  quiet  and  deserted  as  they  had  hoped, 
they  discovered  a  large  crowd  gathei*ed  in  front  of  the  offices 
watching  a  conflagration  across  the  river.  The  nature  of  their 
business  was  thus  sure  to  be  discovered.  This  was  just  what 
they  wished  to  avoid.  After  a  moment's  reflection  it  was  de- 
cided to  drive  with  the  books  to  the  rear  of  the  building  and 
put  them  in  through  a  window.  A  basket  and  cord  were 
found,  the  books  were  hauled  up  to  the  second-story  window 
by  the  secretarv,  and  bv  him  secured  in  the  safe  of  the  com- 


174  AN   ERIE   RAID. 

pany.  Had  the  books,  under  the  circumstances,  l^een  canned 
in  through  the  front  door,  an  officer  armed  with  a  warrant, 
and  accompanied,  if  need  be,  by  pick-locks  and  blacksmiths, 
would,  in  all  probability,  have  been  after  them  before  morn- 
ing. As  it  Avas,  their  return  was  a  secret  until  it  ceased  to  be 
of  importance.  Many  unjustifiable  features  were  assigned  to 
the  proceeding  by  the  Fisk  counsel ;  the  one  thoroughly  un- 
justifiable one  in  their  eyes  was  probably  its  success.  It  was 
never  denied  that  the  secretary  of  the  company  had,  after  the 
removal  of  the  books  and  while  they  were  secreted,  made 
many  entries  in  them.  These,  however,  were  all  of  transac- 
tions concluded  prior  to  the  day  when  the  books  were  to  be 
closed,  and  included  all  of  those  transactions,  whether  favor- 
ing Ramsey  or  Fisk.  Though  much  was  hinted  in  regard  to 
these  entries,  during  the  searching  investigation  they  were 
subjected  to  in  the  subsequent  trial,  no  instance  of  abuse  of 
trust  was  even  specifically  alleged,  much  less  proved.  Nor 
indeed  is  it  probable  in  itself  that  any  such  improper  entries 
were  made,  as  those  who  made  them  must  at  the  time  have 
known  that  they  were  unnecessary  so  far  as  securing  a  major- 
ity of  the  stock  was  concerned. 

The  aspect  of  affairs  was  not,  on  the  whole,  propitious  to 
the  Erie  party  as  the  day  of  election  drew  near.  Their  op- 
ponents held  the  books,  which  forced  them  to  act  very  much 
in  the  dark,  and  the  inspectors  of  election  were  understood  to 
incline  to  the  Ramsey  interest.  That  a  majority  of  the  stock 
also  inclined  to  it  was  a  matter  of  less  moment.  The  situa- 
tion was  full  of  difficulty  ;  but  the  men  called  upon  to  meet 
it  were  full  of  resource.  Their  preliminary  step  was  naturally 
to  lay  in  a  sufficient  supply  of  judicial  orders.  The  regular 
inspectors  must,  in  the  first  place,  be  got  out  of  the  way.  It 
was  ascertained  that  they  were  not  stockholders  ;  the  by-laws 
required  that  the  inspectors  should  be  chosen  from  among  the 
stockholders.  The  Fi8k-(iould  counsel  at  once  applied  to 
Judge  Clerke,  a  colleague  of  Judge  Barnard's,  in  the  First 
District,  and  that  magistrate  granted,  as  a  matter  of  cotu'sc, 
an  ex  parte  order,  restraining  the  inspectors  from  acting  as 


AN   f:RIE   RAID.  175 

such.  Having  obtained  this-  process  from  Judge  Gierke,  and 
filed  it  away  for  use  at  the  proper  moment,  the  counsel  next 
applied  to  Judge  Barnard.  They  quietly  commenced  a  suit  in 
the  name  of  the  Albany  &  Susquehanna  Railroad  Co.  against 
Messrs.  Ramsey,  Pruyn,  Phelps,  and  Smith,  the  president, 
receiver,  secretary,  and  leading  counsel  of  the  company,  to 
recover  damages  for  the  abstraction  of  its  books.  On  this 
complaint  they  obtained  from  Judge  Barnard,  on  the  evening 
of  the  day  preceding  the  election,  an  order  of  arrest  against 
the  defendants,  with  bail  fixed  at  |  25,000.  This,  be  it  re- 
membered, was  a  judicial  proceeding  in  New  York,  and  not  in 
Constantinople.  Thus  panoplied  in  orders,  all  parties  repaired 
on  the  6th  to  Albany.  Mr.  David  Dudley  Field  came  from 
the  pleasant  shades  of  his  summer  retreat  among  the  hills 
of  Berkshire,  and  Mr.  Shearman,  his  associate  in  the  .practice 
of  the  law,  had,  for  the  nonce,  quitted  his  offices  in  the  Grand 
Opera  House,  in  order  himself  to  be  at  the  right  hand  of  his 
chief  in  conducting  those  delicate  proceedings  so  skilfully  and 
secretly  planned  in  New  York.  The  former  gentleman  was 
doubtless  actuated  only  by  a  high  sense  of  his  professional 
duty  to  his  clients,  but  Mr.  Shearman  may  have  been  braced 
for  the  approaching  crisis  by  the  fell  purpose  he  had  recently 
avowed  of  pursuing  even  for  forty  years  the  miscreants  who 
had  failed  properly  to  respect  the  orders  of  the  distinguished 
magistrate  with  whom  his  own  relations  were  such  models 
of  propriety.  Having  arrived  in  Albany,  the  last-named  gen- 
tleman repaired  at  once  to  the  capitol,  where  he  carefully 
informed  himself  as  to  the  details  of  the  election.  This  done,  a 
general  conference  was  held  at  the  Delavan  House,  and  the 
plan  of  operations  was  matured.  The  first  object  was  to 
secure  the  organization  of  the  meeting ;  that  once  done, 
arrangements  of  a  satisfactory  nature  had  been  made  to  hold 
it.  The  trap  was  to  be  sprung  just  before  the  hour  appointed 
for  the  election,  when  the  regular  inspectors  were  to  be  en- 
joined by  the  service  upon  them  of  Judge  Gierke's  ex  parte 
order.  The  whole  regular  machinery  being  thus  dislocated,  a 
preliminary  organization  was  to  be  effected,  three  new  and 


176  AN  ERIE  RAID. 

thoroughly  sound  inspectors  were  to  be  chosen,  which  would 
insure  the  control  of  the  election  and  the  subsequent  posses- 
sion of  the  SusquehanUca  Railway.  Everj'  detail  was  ananged, 
every  person  who  was  to  play  a  part  was  designated  and  care- 
fully taught  his  role.  Such  was  the  extreme  caution  used 
that  Mr.  Sheamian  himself  wrote  out  the  appropriate  resolu- 
tions, and  indorsed  upon  them  the  order  in  which,  and  the 
very  second  at  which,  they  were  to  be  offered  ;  while  Mr. 
David  Dudley  Field  personally  handed  certain  of  them  to  the 
leading  performers,  with  further  verbal  instruction.  Early  the 
next  morning  there  took  place  one  of  the  most  remarkable 
comparisons  of  watches  on  record.  A  special  messenger  vis- 
ited the  Dudley  Observatory,  and  obtained  the  exact  time, 
which  was  by  him  communicated  to  every  active  performer  in 
the  approaching  farce;  or,  rather,  to  all  except  the  vulgar 
majority,  to  whom  time  was  of  no  consequence,  they  being 
hired  by  the  day,  and  constituting  the  fierce  democracy  of  the 
occasion.  These  gentlemen  arrived  by  the  morning  train  from 
New  York  ;  they  were  a  very  singular  party,  such  as  is  more 
frequently  seen  in  the  neighborhood  of  the  riotous  election 
precincts  of  New  York  City  than  in  the  offices  of  respectable 
corporations.  A  breakfast  was  negotiated  for  them  by  an 
employee  of  the  Fall  River  line  of  steamers,  which  constituted 
"Admiral"  Fisk's  naval  command,  at  the  saloon  in  the  sta- 
tion ;  and  there  they  stood  and  fed  at  the  coiniter,  as  rough  a 
set  of  patriots  as  ever  stuffed  a  ballot  or  hit  from  the  shoulder. 
Some  of  them  had  coats,  and  some  had  not ;  their  clothes  were 
in  various  stages  of  dilapidation,  Jis  also  were  their  counte- 
nances ;  open  shirts  disclosed  muscular  breasts,  and  roUed-up 
trousers  stockingless  feet ;  one  man  saved  himself  the  trouble 
of  rolling  up  both  legs  of  his  trousers  by  having  only  one  ; 
they  emphatically  belonged  to  that  class  technically  known  as 
"roughs,"  a  class  subsequently  defined  by  a  witness  as  "men 
with  scjxiTcd  faces  and  noses,  and  black  eyes."  Under  the 
circumstances  it  was  little  to  l)e  wondered  at,  that,  while  they 
indulged  in  a  "square  meal,"  the  keeper  of  the  saloon  g-.ive 
directions  to  have  his  silver  counted.     Pending  the  feeding 


AN   KRIK    RAID.  177 

of  the  democracy,  their  j^roxies  were  in  coarse  of  preparation  ; 
at  last  all  was  ready,  and  between  eleven  and  twelve  o'clock 
they  were  marched  up  fifty  strong  to  the  offices  of  the  com- 
pany. 

Everywhere  things  proceeded  exactly  according  to  plan.  On 
his  way  in  a  carriage  to  the  corporation  offices,  Mr.  Shearman 
happened  to  see  the  injunction  of  Judge  Gierke  served  on  two 
of  the  three  inspectors  as  they  were  on  their  way  to  the  meet- 
ing. This  settled  two  points;  the  injunction  was  a  surprise; 
and  the  regidar  inspectors  were  disposed  of.  Judge  Barnard's 
more  important  order  was  meanwhile  sent  to  the  sheriff",  and 
the  messenger  was  specially  instructed  by  Mr.  Shearman  him- 
self to  hand  it  to  him  with  this  Roman  injunction,  "  Sheriff, 
do  your  duty  ! "  This  instruction  was  given  at  nine  o'clock, 
biit,  curiously  enough,  the  official  had  to  consult  his  lawyer 
about  the  service  of  the  process,  and  this  lawj'er  happened  to  be 
one  of  Mr.  Fisk's  numerous  legal  advisers  ;  with  that  gentleman 
he  remained  in  counsel  until  half  past  eleven  o'clock,  when  at 
last  he  was  advised  to  make  his  arrests  at  once.  By  this  time 
all  the  parties  were  collected  at  the  offices  of  the  company. 
It  might  fairly  be  called  a  mixed  society.  Mr.  Van  Valken- 
burg  had  tendered  to  the  Governor's  receivers  a  guard  of  men 
from  the  shops  of  the  road,  but  these  had  been  refused,  and  a 
large  force  of  Albany  police  were  on  duty  in  the  building. 
Some  thirty  of  the  employees  of  the  company  were  on  hand 
against  an  emergency,  but  under  positive  orders  not  to  enter 
the  offices  \mtil  sent  for.  Up  stairs  was  a  large  array  of  stock- 
holders, directors,  real  and  contingent,  a  few  receivers,  and  a 
score  or  two  of  counsel.  Then  came  the  New  York  importa- 
tion of  niffians,  who  were  divided  into  squads  under  the 
command  of  divers  officials  of  the  Fall  River  boats,  the  Erie 
Railway  and  the  Grand  Opera  House  ;  thus  marshalled,  and 
each  man  proxy  in  hand,  they  were  marched  into  the  room  and 
formed  in  line  at  one  end  of  it.  Besides  these  there  was  pres- 
ent a  choice  collection  of  Albanians  of  somewhat  similar  char- 
acter, either  neutrals  or  inclined  to  Mr..  Ramsey.  How  they 
got  there  did  not  appear,  but  if  the  instructions  to  the  police 

8*  t 


178  AN   ERIE   RAID. 

to  allow  no  one  bnt  holders  of  certificates  of  stock  to  pass  np 
stairs  were  enforced  that  day,  these  certificates  were  certainly 
held  by  a  great  many  strange  characters.  The  Erie  party, 
prominent  among  whom,  were  Messrs.  David  Dndley  Field, 
Thomas  G.  Shearman,  and  James  Fisk,  Jr.,  took  possession 
of  the  directors'  room,  which  their  assortment  of  "  New  York 
stockholders "  wellnigh  filled ;  in  the  adjoining  room  were 
Messrs.  Ramsey,  Pruyn,  and  their  friends  and  advisers. 

Exactly  at  fifteen  minutes  before  twelve  o'clock,  by  observa- 
tory time,  one  Colonel  North,  to  whom  that  role  in  the  Erie 
parts  had  been  assigned,  moved  the  organization  of  the  meet- 
ing. No  opposition  was  encountered,  and  the  gentleman  cast 
for  the  part  of  chairman  was  duly  installed.  The  resolve  in- 
dorsed "No.  1,  Immediate,"  was  then  recited  by  Colonel  North, 
Mr.  Shearman  standing  at  his  side  watch  in  hand,  and  the  old 
inspectors  were  voted  out  of  office  and  the  new  ones  in.  The 
officers  thus  elected  at  once  retired  to  the  treasurer's  room, 
where  the  poll  was  to  be  held,  wliither  they  were  immediately 
followed  by  Mr.  Shearman,  still  watch  in  hand  ;  having  satisfied 
himself  that  all  was  in  readiness  there,  this  master  of  cere- 
monies immediately  returned  to  the  side  of  Colonel  North  and 
resumed  his  comparison  of  timepieces.  At  last  he  said  :  "  It 
is  now  one  minute  of  twelve  ;  keep  your  watch  open  and  be 
■ure  that  you  offer  these  resolutions  at  a  little  after  twelve, 
and  not  before ;  and,  in  order  to  make  sure,  wait  a  few  seconds 
after  twelve,  but  not  more  than  fifteen  seconds."  With  tliis 
j)arting  injunction  he  left  the  Colonel  to  his  own  devices,  and 
"  at  thirty  seconds  of  twelve "  returned  to  the  inspectors' 
room,  just  in  time  to  find  an  injunction  served  oix  those  offi- 
cials. It  was  issued  on  the  complaint  of  David  Groesbeck,  and 
enjoined  an  election  unless  the  stock  held  by  him  was  first 
voted  on.  Now,  at  last,  was  developed  the  entire  significance 
of  the  «?x  par/e  order  under  which  Mr.  William  J.  A.  Fuller  was 
made  receiver  of  this  stock.  Tiiere  were  twenty-five  hundred 
shares  of  it ;  Mr.  Groesbeck  had  paid  for  several  hundred  of 
them  ;  he  was  at  that  very  moment  in  the  next  room  :  he  was 
ou  every  ground  bitterly  opposed  to  the  Erie  direction,  and 


»  AX   ERIK    RAID.  179 

to  the  parody  of  an  election  then  in  process  ;  ilr.  William  J.  A. 
Fuller  was  the  receiver  of  the  stock,  and  it  was  to  this  receiver, 
uow  conveniently  standing  at  his  elbow,  that  Mr.  Shearman 
turned  and  remai'ked  :  "An  injunction  has  been  served  re- 
straining this  election  from  going  on,  nnless  the  votes  on  the 
twenty-four  hundred  shares  which  you  hold  are  first  received, 
and  you  had  better  vote."  Thus  appealed  to,  ^Ir.  Fuller 
modestly  replied  that  he  had  not  intended  to  vote  at  this 
election,  but,  having  been  appointed  receiver,  he  deemed  it  his 
duty  to  do  all  in  his  power  to  preserve  the  property,  and  con- 
cluded his  statement  by  giving  as  a  reason  for  his  vote  that 
the  ticket  which  he  offered  was  composed  of  men  of  the  high- 
est character  and  ability,  whose  election  would  best  secure  the 
rights  of  all  parties  to  the  litigation.  At  the  close  of  these 
remarks  he  actually  voted,  and  the  curious  spectacle  was  ex- 
hibited of  a  court  of  equity  taking  a  man's  stock  away  from 
him  on  the  ground  that  it  was  illegally  issued  and  coixld  not 
be  voted  on  at  all,  and  then  proceeding  to  vote  on  it  itself, 
before  the  man's  face  and  against  his  wishes.  Viewed  calmly, 
and  after  the  event,  such  a  proceeding  strikes  one  chiefly  as  an 
extremely  droll  joke.  The  climax  of  the  humorous,  however, 
was  not  attained  until  some  months  later,  when  Mr.  Fuller 
gravely  stated  in  court  that,  as  a  receiver,  he  considered  it  his 
duty  to  vote  on  stock  without  consulting  the  wishes  of  its 
ostensible  owner,  and  that  for  his  services  as  receiver  in  this 
case  he  had  as  yet  received  no  remuneration,  but  expected 
the  regular  fees,  amomiting  to  $15,000.  After  Mr.  Fuller 
had  thus  relieved  Mr.  Groesbeck  of  the  trouble  of  voting,  and 
after  the  meeting  in  the  next  room  had  gone  through  a  nomi- 
nal reorganization  to  meet  the  letter  of  the  law,  the  polls 
were  declared  open.  The  inspectors  were  withal  curiously 
careless,  or  too  intent  on  the  passage  of  time  to  think  of  aught 
else  ;  they  certainly  neglected  to  be  qualified  by  taking  oath 
as  to  the  performance  of  their  d\ities,  which  was  specially  pre- 
scribed in  the  by-laws  ;  neither  did  they  use  any  ballot-box, 
other  than  the  straw  hat  of  one  of  their  number.  In  this, 
however,  the  ballots  were  deposited,  and  the  election  went 


180  AN'  ERIE   12  AID.  - 

briskly  on  for  some  fifteen  minutes,  when,  under  th.o  names 
of  John  Doe,  Richard  Roe,  and  James  Jackson,  the  inspectors 
were  again  enjoined,  this  time  from  any  further  proceedings. 
Most  of  their  tickets  had,  however,  already  been  voted,  and 
this  injimction  was  violated  by  the  reception  of  othei-s,  subse- 
quently offered,  only  in  a  moderate  degree. 

Meanwhile  events  did  not  stand  still  in  the  little  library 
adjoining  the  directors'  room,  where  Mr.  Ramsey  and  his 
friends  were  collected.  The  sheriff  of  Albany,  after  leaving 
the  office  of  his  legal  adviser,  proceeded  to  "do  his  duty." 
As  Mr.  Ramsey  was  intently  listening  in  the  president's  office 
to  Colonel  North,  who  was  moving  the  organization  in  the 
next  room,  some  one  suddenly  touched  his  arm,  and  he  became 
conscious  of  the  sheriff  at  his  side.  Here  was  a  thunderbolt. 
At  the  very  instant  when  his  presence  was  most  necessary, 
when  all  depended  on  the  full  possession  of  his  liberty  and 
his  faculties,  he  found  himself,  the  secretary  of  the  company 
and  its  legal  adviser,  under  arrest.  The  thing  could  not  have 
been  better  timed.  To  understand  the  full  possible  effect  of 
this  move,  it  is  necessary  to  bear  in  mind  a  remark  made 
by  Ml*.  Shearman  in  his  subsequent  testimony,  though  in  an- 
other connection  :  "I  did  n't  want  to  lose  a  second's  time,  be- 
cause 1  knew  the  value  of  time  in  this  case,  and  I  knew 
that  the  whole  question  would  have  to  depend  upon  the 
question  of  which  meeting  was  organised  first."  The  officials 
of  the  road  were  therefore  arrested,  by  mere  accident,  as  it 
was  claimed,  just  when  they  should  have  been  organizing 
their  meeting.  Nor  did  the  possible  benefit  to  be  derived 
from  this  measure  stop  here.  The  election  was  limited  to 
one  hour,  and  the  sheriff  was  instructed  "  to  do  his  duty." 
He  might  have  effected  his  arrest  at  ten  o'clock ;  but  had  he 
done  so,  the  parties  would  have  been  bailed  at  once,  and  the 
arrest  might  as  well  not  have  been  made.  Having  been  made 
at  exactly  the  right  moment,  the  sheriff  might  now  further 
construe  it  to  be  his  duty  to  remove  the  prisoners  to  his  office, 
there  to  aiTango  their  bail.  The  votes  on  which  Mr.  Ramsey 
relied  were,  of  courae,  held  by  him  in  the  usual  fonn  of  prox- 


AN   ERIE   RAID.  181 

ies  ;  they  were,  in  fact,  on  this  day  so  cast  by  him.  Conld 
he,  therefore,  be  held  in  durance,  away  from  the  offices,  by 
any  fictitious  delays  and  objections,  for  one  short  hour,  the 
election  would  be  over  and  irrevocably  decided  against  him. 
The  construction  the  sheriff  should  give  to  "his  duty"  in  the 
premises  was  very  vital,  and  fully  warranted  his  lengthy  inter- 
view with  that  gentleman  who  was  the  common  adviser  of 
himself  and  the  Erie  Railway  Company.  The  whole  proceed- 
ing certainly  spoke  volumes  for  t\e  ingenuity  and  resource 
of  those  who  engineered  it.  In  its  style  it  could  not  have 
been  improved. 

Mr.  Ramsey  was  thus  a  prisoner.  He  proposed  at  first  to 
leave  the  room  to  consult  his  friends,  but  was  requested  by 
the  sheriff  to  remain  in  it,  and  here  he  was  soon  visited  by 
Mr.  David  Dudley  Field,  of  coimsel  for  the  Erie  Railway 
Company,  who  satisfied  himself  that  the  sheriff  was  doing 
"  his  duty  "  by  taking  a  comprehensive  glance  at  the  situa- 
tion. Finding  this  greatly  to  his  mind,  he  then  proceeded, 
with  a  smile  indicative  of  profound  satisfaction  and  with  his 
thumbs  in  the  armholes  of  his  waistcoat,  to  inquire  of  Mr. 
Ramsey  as  to  the  present  condition  of  his  health.  Mr.  Ram- 
sey has  the  reputation  of  being  a  remarkably  cool  and  im- 
perturbable man,  so  that  now,  when  his  counsel.  Mi-.  Smith, 
entered  the  room  in  a  state  of  intense  excitement  and  indig- 
nation, and  also  imder  arrest,  he  received  simply  a  direction 
to  go  back  and  attend  to  the  election,  while  Mr.  Ramsey  him- . 
self  effected  the  bail  arrangements.  It  is  not  clear  whether 
the  sherift'  lacked  nerve  to  construe  his  duty  as  he  might  have 
done,  or  whether  the  delay  already  occasioned  was  considered 
sufficient ;  at  any  rate,  though  he  certainly  arrested  his  prison- 
ers at  exactly  the  proper  moment,  he  did  not  remove  them 
from  the  building.  He  was,  indeed,  even  provided  with  blank 
bail  bonds,  which  were  produced  and  filled,  though  not  mitil 
objection  had  been  made  to  the  security  of  one  or  two  gentle- 
men notoriously  worth  millions ;  and  this  done  the  prisoners 
were  released.  All  this  had  occupied  half  an  hour  ;  on  the 
theory  of  Mr.  Shearman  it  was  now  too  late,  the  moment  had 


182  AN   ERIE   RAID. 

passed ;  the  coup  had  been  completely  successful.  Mr.  Smith 
had,  indeed,  gone  back  and  organized  a  stockholders'  meeting 
in  the  hall  of  the  building ;  but  not  imtil  ten  minntes  after 
twelve,  and  when  the  polls  of  the  other  organization  had  been 
long  open.  The  Erie  party  were,  in  their  own  belief,  in  pos- 
session of  the  Albany  &  Susquehanna  Railroad  beyond  a 
peradventure. 

Before  going  on  with  the  narrative,  a  few  words  may  here 
be  not  out  of  place  concerning  the  much-discussed  question 
of  the  limits,  if  there  be  any,  of  the  duty  which  counsel  owe 
to  their  clients.  The  celebrated  dictum  of  Lord  Brougham 
in  this  regard  is  sufficiently  general  in  its  terms  :  "  An  advo- 
cate, by  the  sacred  duty  which  he  owes  his  client,  knows,  in 
the  discharge  of  that  office,  but  one  person  in  the  world,  that 
CLIENT  AND  NONE  OTHER.  To  savc  that  clicut  by  all  expedient 
means,  to  protect  that  client  at  all  hazards  and  costs  to  all 
others,  and  among  others  to  himself,  is  the  highest  and  most 
miquestioned  of  his  duties ;  and  he  must  not  regard  the 
alarm,  the  suffering,  the  torment,  the  destruction  which  he 
may  bring  on  any  other.  Nay,  separating  even  the  duties 
of  a  patriot  from  those  of  an  advocate,  and  casting  them, 
if  need  be,  to  the  wind,  he  must  go  on  reckless  of  the  conse- 
quences, if  his  fate  it  should  unhappily  be  to  involve  his 
country  in  confusion  for  his  client's  sake  ! " 

Certainly  no  counsel  could  have  acted  more  fully  up  to 
both  the  letter  and  spirit  of  this  famous  rule  than  did  Messrs. 
David  Dudley  Field  and  Thomas  G.  Shearman,  of  counsel  for 
the  Erie  Railway  Company,  on  this  notable  occasion.  They 
even  "  cast  to  the  wind  "  the  single  faint  limitation  conveyed 
by  Lord  Broiigham  in  the  words  "  to  save "  and  "  to  2irotect  " 
by  all  "  expedient  means  "  ;  and,  in  the  intense  fervor  of  their 
devotion  to  their  clients,  had  recourse  in  aggressive  proceed- 
ings to  processes  of  law  which  were  subsctiucntly  judicially 
characterized  ns  procured  "  in  aid  of  fraudulent  purposes." 
Attending  one's  clients  to  corporation  meetings,  at  the  head 
of  a  band  of  "  rude,  rough,  and  dangerous  persons  "  and  there 
acting  as  the  master  of  ceremonies,  through  the  parody  of  an 


AN   ERIE   RAID.  183 

election,  was  a  case  which  undoubtedly  Brougham  would  have 
included  in  his  definition,  had  it  occurred  to  him ;  but  it 
probably  escaped  his  notice,  from  the  fact  that,  since  the  fall 
cf  the  Reman  Republic,  such  proceedings  have  not  been  usual 
The  ingenious  device,  also,  of  arresting  one's  opposing  counsel 
and  holding  him  to  $25,000  bail,  at  the  moment  when  his 
professional  services  are  likely  to  become  peculiarly  necessary, 
is  a  feature  in  legal  amenities  with  which  the  English  bairister 
could  not  have  been  expected  to  be  familiar.  A  high  author- 
ity has  now,  however,  established  these  as  part  of  the  duties 
of  the  American  advocate.  Instances  of  similar  devotion 
will,  therefore,  unless  the  now  obsolete  practice  of  disbarring 
should  chance  to  be  revived,  probably  hereafter  become  more 
common  than  they  hitherto  have  been.  The  use  of  unusual 
processes  of  court,  unpleasantly  suggestive  of  lettres  de  cachet, 
quietly  procured  and  suddenly  brought  in  play,  would  seem  also 
to  have  met  of  late  w4tli  an  undeserved  odium.  Whether 
these  will  again  arrive  at  the  great  efficiency  as  an  element  in 
litigation  which  they  once  attained  in  France  will,  perhaps, 
depend  upon  the  degree  of  fidelity  with  which  sheriffs  do  their 
duty.  For  the  shortcomings  of  such  officials,  advocates  natu- 
rally cannot  be  held  accountable,  even  by  the  most  exacting 
of  clients.  The  client,  moreover,  in  whose  defence  Brougham 
was  prepared,  if  need  be,  "  to  involve  his  country  in  confu- 
sion "  was  the  Queen  of  England ;  which,  indeed,  cannot  but 
cause  the  deeper  sense  of  a  professional  devotion,  no  less  reck- 
less, exerted  in  furtherance  of  the  schemes  of  Mr.  James 
Fisk,  Jr.* 

•  It  ought,  perhaps,  to  be  stated  in  this  connection,  that  the  opinion  com- 
monly entertained  of  the  transactions  with  which  the  names  cf  Fisk  and 
Gould  are  associated  was  not  apparently  shared  by  their  counsel.  These 
gentlemen,  whose  close  acquaintance  with  the  facts  in  the  case  must  certainly 
liave  qualified  them  to  form  an  intelligent  judgment,  have  made  no  con- 
cealment of  what  that  extra  professional  judgment  was.  Upon  this  point 
5Ir.  Sheannan  expressed  liimselfverv  explicitly  before  a  legislative  committee 
nt  Albany  on  the  31st  of  March,  1870,  six  months  subsequent  to  the  Susque- 
hanna proceedings.  He  then  paid  tiie  following  high  tribute  to  himself  and  to 
Jlessrs.  Field,  Fisk,  and  Gould:  — 

"  If  I  were  to  speak  from  my  own  personal  judgment  of  the  management 


184  AX  i:niK  raid. 

To  return  from  this  abstract  digression  to  the  narrative, 
little  remains  to  be  said  of  the  election  after  the  release  of  Mr. 
Ramsey  was  effected.  While  bail  was  being  procured,  and  the 
necessary  bonds  executed,  a  second  meeting  had  been  organ- 
ized by  Mr.  Smith  in  the  hall  before  the  offices,  and  this  meet- 
ing had  proceeded  to  choose  inspectors,  who  were  duly  sworn 
and  received  from  the  secretary  the  prescribed  list  of  stock- 
holders. They  then  opened  their  polls  in  the  same  room  and 
at  the  same  desk  at  which  the  opposition  inspectoi's  were  still  sit- 
ting. Mr.  Shearman  immediately  stepped  in  front  of  them  and 
began,  on  various  grounds,  to  challenge  every  vote.  Of  course 
his  challenge  was  disregarded,  but  the  process  was  kept  up  by 
himself  or  others,  until,  towards  one  o'clock,  both  polls  were 
declared  closed.  Neither  party  attempted  to  vote  at  the  polls 
of  the  other,  nor  was  there  any  disorder  or  disturbance.  The 
two  boards  then  canvassed  their  votes;  the  Erie  board  de- 
clared that  the  ticket  voted  for  at  their  polls  had  received 
13,400  votes,  and  was  elected.  Shortly  afterwards  the  Ram- 
sey board  declared  that  the  ticket  voted  for  at  their  poll  had 

of  the  (Erie  road,  I  should  say  that  I  have  never  been  able  to  find  where  these 
fraudulent  acts  charged  were  committed.  I  have  never  been  able  to  find 
where  the  villany  comes  in.  1  have  been  looking  for  it  very  anxiously.  I 
have  thought  that  the  newspapers  were  edited  by  men  so  much  wiser  than 
myself  that  they  must  know  all  about  it,  and  I  confess  that  when  I  entered 
upon  the  service  of  the  company,  amid  a  ])erfect  clamor  on  the  part  of  the 
newspapers,  I  thought  they  were  edited  by  such  wise  men  that  there  must  be 
something  wrong,  and  I  entered  upon  my  duties  witli  fear  and  trembling,  but 
I  found  no  occasion  for  fear  and  trembling." 

Mr.  Liulfjohn.   You  are  speaking  as  a  lawyer  now? 

Mr.  Shearnum.  No,  sir,  —  as  a  man ;  and  now  as  a  lawyer  I  say  that  I 
think  it  is  no  slight  tribute  to  the  character  of  the  gentlemen  who  are  in  the 
managenuMit  of  the  Krie  Company,  that,  knowing  as  they  did  how  particular 
I  was  in  regard  to  the  management  of  its  oflicers.  how  careful  I  was  that  no 
injustice  should  bo  done  to  the  company,  and  iiow  strongly  determined  I  was 
that  its  interests  should  not  snflcr,  they  confided  their  affairs  in  my  hands. 
And  they  have  confided  also  in  a  gentleman  of  su|)erior  age  and  of  very  high 
character,  a  gentleman  with  a  Qufrcotic  sense  of  honor,  a  gentleman  who  has 
never  done  a  dishonorable  action,  a  gentleman  whom  the  other  side  would  have 
been  glad  to  engage  for  themselves  if  they  could  have  done  so, —  Mr  I)avi<l 
Dudley  Field.  Mr.  Field  has  been  chosen  by  tl.c  Krie  Railway  Company  a-^ 
their  adviser,  an<l,  trained  with  Mr.  Field,  I  have  learned  something  of  his 
high  sense  of  professional  honor,  etc. 


AN   ERIE   RAID.  185 

received  10,742  votes,  and  was  elected.  The  two  boards  of 
directors  thus  chosen  then  met  and  organized,  the  one  by  the 
choice  of  Colonel  Church  as  president,  and  the  other  by  the 
re-election  of  Mr.  Ramsey ;  and  having  then  sufficiently  re- 
garded each  other  from  the  opposite  sides  of  the  directors' 
room,  in  due  time  they  adjourned. 

The  election  was  over,  and  apparently  nothing  was  decided 
by  it.  Each  of  the  boards  elected  claimed  to  be  the  regular 
and  only  lawful  one,  and  neither  of  them  in  any  way  recog- 
nized the  other.  Fortunately  the  agents  of  Governor  Hofl'man 
were  still  in  actual  possession.  The  Erie  party  had,  indeed, 
endeavored  to  take  advantage  of  this  fact,  b}-  including  in  their 
list  of  directors  both  Messrs.  McQuade  and  Banks,  who  were 
then  operating  the  road  under  the  authority  of  the  Governor. 
This  move  wholly  failed.  Both  of  these  gentlemen  instantly 
and  peremptorily  withdrew  from  the  board  when  notified  of 
their  election.  Governor  Hoffman  was  the  one  person  now  re- 
sponsible, and  he  very  wisely  called  \ipon  the  courts  to  decide 
who  was  legally  entitled  to  the  possession  of  the  road.  At  his 
direction  the  Atfbrney-General,  immediately  after  the  election, 
began  a  new  suit,  in  which  all  parties  litigant  were  included, 
and  a  general  decision  on  the  merits  was  prayed  for.  This 
was  the  only  way  to  cut  the  knot.  The  previous  litigatioii 
was  in  a  state  of  hopeless  chaos.  Twenty-two  suits  had  been 
begun,  a  score  of  injmictions  had  been  issued,  numberless 
orders  had  been  made,  and  both  parties  now  stood  ready  to 
continue  the  same  style  of  warfare,  just  as  long  as  any 
judge  could  be  found  who  disregarded  the  duties  of  his 
position  on  the  one  side,  or  who  did  not  lack  nerve  on  the 
other. 

The  action  brought  by  the  Attorney-General  came  on  for 
trial  before  Justice  E.  Darwin  Smith,  at  Rochester,  on  the  29th 
of  November  succeedhig  the  election.  The  intervening  time 
had  been  wasted  by  neither  part}'.  Messrs,  Fisk  and  'Gould 
had  utilized  it  in  those  manipulations  of  the  gold  market, 
which  had  resulted  in  the  celebrated  explosion  of  Septem- 
ber 24,  long  to  be  famous  as  the  "black  Friday"  in  Wall  Street 


186  AN   ERIK   RAID. 

annals.  Mr.  Ramsey,  meanwhile,  had  confined  his  attention 
to  the  quarrel  already  existing,  and  had  carried  the  war  vigor- 
ously into  Africa,  assailing  the  Erie  management  in  its  own 
stronghold  through  the  suit  of  Ramsey  vs.  Erie  et  als.  Writs, 
orders,  injunctions,  receiverships,  and  conflicts  of  jurisdiction 
had  become  matters  of  such  daily  occurrence  as  hardly  to 
excite  a  passing  notice,  and  the  complications  which  had  grown 
up  around  the  Erie  ring  were  only  exceeded  by  the  scandal 
they  caused.  Hitherto,  strong  in  the  protection  of  the  more 
reckless  of  the  city  judges,  Messrs.  Gould  and  Fisk  had  suf- 
fered no  material  defeat ;  they  had,  indeed,  in  so  far  as  the 
law  was  concerned,  carried  all  before  them  ;  for  to  them  the 
law  was  simply  a  process  for  annoying  others,  and  obstructing 
all  that  was  calculated  to  annoy  them.  Foiled  in  their  attemj)t 
to  get  control  of  the  Susquehanna  road  by  force,  they  did,  in- 
deed, now  try  to  get  it  by  negotiation  ;  they  proposed  a  com- 
promise of  all  existing  disputes  on  the  basis  of  a  lease  of  this 
road  by  the  Erie  for  a  term  of  ninety-nine  years,  at  a  rent 
equal  to  seven  per  cent  on  its  bonds  and  stock  outstanding, 
with  a  thirty  per  cent  stock  dividend  flung  in  as  a  bonus.  The 
Susquehanna  people  listened  to  the  proiwsal,  but  it  finally 
appeared  that  no  further  giuu'anty  than  the  word  of  the  Erie 
managers  was  contemplated.  The  Atlantic  &  Great  Western 
Railroad  had  already  illustrated  the  value  of  that.  Like  Fal- 
stafTs  tailor,  the  Susquehanna  people  "  liked  not  the  security  "  ; 
and  the  other  party,  like  the  fat  old  knight  himself,  "  had  as 
lief  they  would  put  ratsbane  in  my  mouth  as  offer  to  stop  it 
with  security."  The  negotiation  fell  wholly  through,  and 
nothing  remained  but  the  arbitrament  of  a  country  justice  of 
the  Supreme  Court. 

At  the  end  of  November  the  case  was  in  order  for  trial.  The 
Executive,  the  Attomey-Cjreneral,  the  court,  and  the  Ramsey 
counsel  were  ready  and  in  earnest.  Tlie  usual  motions  for  de- 
lay from  the  other  side  wei'c  received  with  little  favor.  It  was 
shown  that  another  suit,  in  which  Messrs.  Fisk  and  (»ould  and 
their  leading  counsel  were  engaged,  was  tlien  on  trial  before 
Judge  Barnard.     It  was  of  no  avail  j  the  parties  were  ordered 


AN   EKIE   KAID.  187 

to  proceed,  and  the  cases  before  Judge  Barnard  had  to  be  post- 
poned. The  trial  lasted  ten  days,  and  a  vast  ainonnt  of  evi- 
dence was  put  in.  Mr.  Fisk  and  Mr.  Gonld  were  conspicuous 
by  their  absence  from  the  witness-stand,  but  their  counsel  were 
put  upon  it,  and  Messrs.  Harris  and  Shearman  each  told  his 
own  story.  Some  features  of  the  evidence  and  incidents  of  the 
trial  were  far  from  creditable.  Among  these  may  especially 
be  mentioned  an  attempt  to  create  an  impression  that  Mr. 
Ramsey  had  once  been  under  an  indictment  for  forgery.  So 
grave  a  charge  seemed  most  unlikely  to  be  made  without  some 
shadow  of  reason.  In  this  case,  however,  it  was  wantonly 
advanced,  and  even  the  machinery  through  which  it  was  manu- 
factured was  subsequently  exposed.  Naturally  this  proceeding 
and  others  reacted  violently  on  those  who  had  sought  to  derive 
advantage  from  them.  Public  feeling  in  the  court-room  and 
in  the  city  of  Rochester  grew  very  strong  as  the  case  pro- 
ceeded, showing  itself  in  waj's  not  to  be  mistaken.  As  the 
case  was  on  the  equity  side  of  the  court,  there  was  no  inter- 
vention of  a  jury,  no  chance  of  an  inability  to  agree  on  a  ver- 
dict. After  the  evidence  was  all  in,  and  the  case  had  been 
elaborately  argued  by  Mr.  David  Dudley  Field  for  the  Erie 
party,  and  by  Mr.  Henry  Smith  for  the  Susqiiehanna  party. 
Judge  Smith  took  the  papers,  but  reserved  his  decision.  It 
was  January  before  this  was  made  public. 

There  are  cases  where  a  judge  upon  the  bench  is  called 
upon  to  vindicate  in  no  doubtful  way  the  purity  as  well  as  the 
majesty  of  the  law  ;  cases  in  which  the  parties  before  the  court 
sliould  be  made  to  feel  that  they  are  not  equal,  that  fraud  is 
fraud  even  in  a  court  of  law,  —  that  cavilling  and  technicali- 
ties and  special  pleading  cannot  blind  the  clear  eye  of  equity. 
It  is  possible  that  even  a  judicial  tone  maybe  overdone  or 
be  out  of  place.  There  are  occasions  when  the  scales  of  justice 
become  almost  an  encvmibrance,  and  both  hands  clutch  at  the 
sword  alone.  Whether  the  magistrate  upon  whom  the  de- 
cision of  this  cause  devolved  was  right  in  holding  this  to  be 
such  an  occasion  is  not  now  to  be  discussed ;  it  is  enough  to 
say  that  his -decision  s\istained  at  every  point  the  Ramsey 


188  AN   ERIE   RAID. 

board,  and  crushed  in  succession  all  the  schemes  of  the  Erie 
ring.  The  opinion  was  most  noticeable  in  that  it  approached 
the  inquiry  in  a  large  spii'it.  Its  conclusion  was  not  made  to 
turn  on  the  question  of  a  second  of  time,  or  a  rigid  adherence 
to  the  letter  of  the  law,  or  any  other  technicality  of  the  petti- 
fogger ;  it  swept  all  these  aside  and  spoke  firmly  and  clearly 
to  the  question  of  fraud  and  fraudulent  conspiracy.  All  the 
elaborate  comparison  of  watches,  and  noting  of  fractional  parts 
of  a  minute,  which  marked  the  org-.inization  of  the  Erie  meet- 
ing were  treated  with  contempt,  but  the  meeting  itself  was 
pronounced  to  be  organized  in  pursuance  of  a  previous  con- 
spiracy, and  the  election  held  by  it  was  "  irregular,  fraudulent, 
and  void."  The  scandals  of  the  law  —  the  strange  processes, 
injunctions,  orders,  and  conflicts  of  jurisdiction  —  were  dis- 
posed of  with  the  same  grasp,  whenever  they  came  in  the  path 
of  the  decision.  The  appointment  of  Fuller  as  receiver  was 
declared  to  have  been  made  in  a  "  suit  instituted  for  a  fraudu- 
lent pur])ose,"  and  it  was  pronounced  in  such  "  clear  conflict 
with  the  law  and  settled  practice  of  the  court "  as  to  be  ex- 
plicable only  on  a  supposition  that  the  order  was  "granted 
incautiousl}',  and  iipon  some  mistaken  oral  representation  or 
statement  of  the  facts  of  the  case,"  The  order  removing  the 
regular  inspectors  of  election  was  "  improvidenfc-ly  granted  " 
and  was  "  entirely  void" ;  and  the  keeping  it  back  by  counsel, 
and  serving  it  only  at  the  moment  of  election,  was  "  an  ob- 
vious and  designed  surprise  on  the  great  body  of  stockhold- 
ers." The  suit  under  which  the  Barnard  order  of  arrest  was 
issued  against  Ramsey  and  Phelps  was  instituted  without  right, 
the  order  of  arrest  Avas  iniauthorized,  the  order  to  hold  to 
bail  "  most  extr.iordinary  and  exorbitant,"  and  was  procured 
"  in  aid  of  fraudulent  purposes."  The  injunction  forbidding 
llamsey  to  act  as  president  of  the  company  was  "entirely 
void."  The  three  thousand  shares  of  forfeited  stock  reissued 
to  Mr.  Croesbcck  were  pronounced  "  valid  stock,"  and  numerous 
precedents  were  cited  in  which  the  principle  had  been  sus- 
tained. Even  the  sub8crii)tion  for  the  nhie  thousand  five 
hiuidred  new  shares  of  stock  by  Ramsey  and  his  friends,  on 


AN   KRIE   IJAII).  180 

which  they  had  not  even  attempted  to  vote  at  the  election, 
was  dechired,  in  point  of  law,  regular,  valid,  and  binding. 
Upon  the  facts  of  the  case  the  decision  was  equally  outspoken  ; 
it  was  fraud  and  conspiracy  everywhere.  "  The  importation 
and  crowding  into  a  small  room  "  of  a  large  number  of  "rude, 
rough,  and  dangerous  persons,"  and  furnishing  them  with 
pi-oxies  that  they  might  participate  in  the  proceedings  of  the 
meeting,  "  was  a  gross  perversion  and  abuse  of  the  right  to 
vote  by  proxy  and  a  clear  infringement  of  the  rights  of  stock- 
holders, tending,  if  such  proceedings  are  countenanced  by  the 
courts,  to  convert  corporation  meetings  into  places  of  disorder, 
lawlessness,  and  riot."  Finally,  costs  were  decreed  to  the 
Ramsey  board  of  directors,  and  a  reference  was  made  to  Sam- 
uel L.  Selden,  late  a  judge  of  the  (Jourt  of  Appeals,  to  ascer- 
tain and  report  a  proper  extra  allowance  in  the  case,  and  to 
which  of  the  defendants  it  was  to  be  paid. 

The  legal  scandals  of  the  case  were  not  yet  quite  exhausted. 
No  sooner  was  this  decision  announced  and  telegraphed  to 
New  York,  than  the  Erie  counsel  at  once  had  recourse  to  the 
judges  of  that  city.  As  a  matter  of  course,  an  ex  parte  order 
was  instantly  granted,  staying  the  entry  of  judgment.  It 
reached  Rochester  a  few  hours  too  late  ;  the  judgment  was 
entered.  The  next  day  a  new  order  was  obtained,  staying  all 
proceedings  under  the  judgment;  and  this  was  served  on 
Messrs.  Banks  and  McQuade,  who  were  still  in  possession  of 
the  road.  Recourse  was  had  to  Judge  Pcckham,  who  quietly 
declared  the  stay  of  no  effect,  and  granted  an  order  piitting 
the  Ramsey  board  in  possession.  Then  at  last  the  keys  were 
delivered  to  them.  The  Erie  counsel  were  not  yet  satisfied. 
A  motion  was  made  to  vacate  the  judgment.  This  was  sup- 
ported by  affidavits  of  counsel  of  the  most  iinusual  nature. 
Imputations  of  unfairness,  irregularity,  bias,  and  conduct  oth- 
erwise wholly  imbecoming  a  magistrate,  were  advanced  against 
Judge  Smith.  The  four  leading  lawyers  of  the  defeated  party 
then  united  in  a  certificate,  which  concluded  with  these  singu- 
lar words  :  "  We  have  examined  the  opinion  of  Mr.  Justice 
Snuth  in  this  cause,  and,  in  our  judgment,  it  is  in  every  ma- 


190  AN    ERIE    RAID. 

terial  part  erroneous,  either  in  fact  or  in  law."  It  may  be 
necessary  to  mention  here  that  this  was  a  certificate  of  counsel 
on  the  losing  side  of  a  decided  case,  applying  to  one  judge  of 
the  Supreme  Court  of  New  York,  to.  vacate  a  judgment  just 
entered  by  another  judge  of  the  same  court.  It  ought  to  be 
unnecessary  to  add  that  the  assumptions  on  which  the  motion 
was  based  wci-e  pronounced  "  simply  monstrous "  ;.  and  the 
affidavits  were  ordered  to  be  stricken  from  the  record  as  "  ir- 
relevant and  impertinent."  Nothing  now  remained  to  the  Erie 
faction  but  the  slow  process  of  appeal,  with  their  opponents  in 
actual  possession. 

The  struggle  M-^as  over.  Long  before  any  action  could  be 
taken  on  the  decision  of  Judge  Smith,  at  the  general  term  of 
the  court,  the  Albany  &  Susquehanna  Railroad  was  beyond  the 
reach  of  Fisk  or  Gould  or  the  Erie  Railway.  Early  in  Febru- 
ary, 1870,  the  Ramsey  direction  leased  the  whole  property  in 
perpetuit}',  and  on  very  favorable  terms,  to  the  Hudson  &, 
Delaware  Canal  Company.  This  arrangement  transferred  the 
struggle  from  the  comparatively  weak  shoulders  of  the  rail- 
road itself  to  those  of  one  of  the  most  powerful  and  wealthy 
corporations  in  the  country.  With  it  the  Erie  managers 
could  not  aft'ord  to  quairel,  so  they  were  fain  to  profess  them- 
selves satisfied  with  the  result,  and  to  desist  from  the  con- 
test. 

Meanwhile  the  Hon.  Samuel  L.  Selden  was  busy  over  his 
reference  ;  and  the  case  was  wcUnigh  forgotten  before  he  made 
his  report.  When  it  was  made,  it  was  calcxxlated  to  revive  a 
very  fresh  recollection  of  the  litigation  in  the  minds  of  Mr. 
Fisk's  board  of  directors.  This  was  composed  of  thirteen 
individuals,  of  whom  Messrs.  Fisk  and  Gould  were  two.  The 
ro()ort  of  Mr.  Selden  was  long  and  very  minutely  drawn  ;  it 
was  a  document  likely  to  be  accepted  by  the  court,  and  not 
easily  overthrown  on  appeal.  "  In  view  of  the  whole  history 
of  this  extraordinary  case,"  and  in  consideration  of  the  assump- 
tion by  the  Albany  &  Susquehanna  Railroad  Co.  of  the  entire 
expenses  of  the  litigation,  the  sum  of  ninety-two  thousand  dol- 
lars was  fixed  upon  us  a  just  and  proper  extra  allowance  to  be 


AX   ERIE   RAID.  101 

paid  by  the  persons  constituting  the  Fisk  board  of  directors  to 
those  persons  constituting  the  Ramsey  board.* 

*  An  nppeal  was  taken  by  the  Fisk  board  of  directors  from  the  decision  of 
Judge  Smith,  referred  to  in  tlie  text,  and  reported  in  7  Abbot's  Pr.  Rep.  N.  S  , 
p  265.  The  decision  of  the  General  Tei-m  was  not  a!:nonnccd  until  May,  1871. 
It  turned  whollj^  upon  technical  points,  a*  d  in  no  respect  entered  into  the 
merits  of  the  controversy;  upon  these  the  findings  of  tiie  court  below  were  ap- 
parently accepted  as  conclusive.  The  decision  of  Judge  Smith  was  affirmed 
in  so  fjr  as  it  declared  the  election  of  the  Fisk  board  fraudulent  and  void,  and 
tliat  of  the  Ramsey  board  valid,  on  the  ground  that  this  question  was  properly 
before  the  court,  and  it  was  competent  to  pass  upon  it.  Judge  Smith  had  also 
decreed  that  the  proceedings  in  all  the  suits  on  either  side  between  the  parties 
defendant  should  be  stayed  and  discontinued.  This  relief,  it  was  held,  upon 
technical  grounds,  the  court  below  was  not  competent  to  grant,  and  upon  this 
point  the  decision  was  reversed.  It  was  also  reversed  upon  the  question  of 
costs,  upon  the  ground  that  in  an  action  brought  by  the  People  against  two 
sets  of  defendants  the  court  had  no  power  to  grant  costs  to  one  set  against  the 
other. 

The  Ramsey  party  was,  therefore,  sustained  in  the  possession  of  the  prop- 
erty; but  the  Fisk  party  escaped  the  payment  of  costs  under  the  Selden  refer- 
ence.  So  far  as  the  scandals  in  litigation  were  concerned,  which  gave  so  gresit 
a  notoriety  to  this  case  between  the  preparation  and  publication  of  this  paper, 
the  court  at  General  Term  confined  itself  to  a  simple  closing  reference  to  them. 
Profound  regret  was  expressed  at  the  occurrences  which  had  preceded  the 
action  then  before  the  court,  which  in  itself,  however,  it  was  declared  had  been 
ma.'ked  by  ro  unbecoming  conduct  on  the  part  of  counsel. 


CAPTAIXE    JOHN    SMITH,* 

SOMETIME  GOVERNOUR   IN  VIRGINIA  AND  ADMIRALL  OF 
NEW   ENGLAND. 


A  Discourse  of  Virginia.  By  Edward  Maria  Wingfield,  the 
First  President  of  the  Colony.  Edited  by  Charles  Deaxe, 
Member  of  the  American  Antiquarian  Society,  and  of  the 
Massachusetts  Historical  Society.  Boston :  Privately  printed. 
1860. 

A  Tnce  Relation  of  Virginia.  By  Captain  John  Smith. 
With  an  Introduction  and  Notes,  by  Charles  Deane. 
Boston.     1866. 

THE  ordinary  reader  will  see  in  the  small  book  lately  pub- 
lished by  Mr.  Deane  a  simple  reprint  of  a  black-letter 
pamphlet  which  is  one  of 'the  most  precious  jewels  of  Ameri- 
can bibliojwles.  There  is  not  a  word  in  the  title-page  to  sug- 
gest that  the  Introduction  and  notes,  which  are  the  work  of  the 
editor,  serve  any  other  purpose  than  to  explain  and  illustrate 
the  text.  The  volume  is  in  appearance  as  innocent  and  free 
from  heretical  taint  as  the  reprint  of  the  New  England  Primer. 
Yet  any  one  familiar  with  the  course  of  Mr.  Deanc's  previous 
inquiries  knows  quite  well,  in  taking  up  the  book,  that  he  is 
about  to  find  very  original  views  in  regard  to  some  (jxtremoly 
interesting  questions  of  colonial  history  ;  and  if  Mi-.  Deane 
has  chosen  to  adopt  this  modest  form  of  publication,  it  is  by 
no  means  because  what  he  has  to  say  would  not  warrant  an 
original  and  indei)cndent  work  bearing  his  own  name  alone 
on  the  title-page.  If  the  opinions  advanced  by  Mr.  Deane, 
which  it  will  be  our  aim  to  explain,  are  correct,  a  very  serious 

*  From  the  North  Aniericiin  Review  for  JiinuHry,  1867. 


CAPTAIN   JOHN    SMITH.  193 

change  in  received  ideas  concerning  the  eai-ly  history  of  Vir- 
ginia will  be  necessary,  and  one  to  which  the  American  people 
will  find  it  difficult  to  I'econcile  themselves. 

Stated  in  its  widest  bearings,  the  question  raised  in  this 
publication  is  upon  the  veracity  of  Captain  John  Smith ;  and 
since  the  accoimt  of  the  colonization  of  Virginia  has  hithei'to 
been  almost  exclusively  drawn  from  Smith'a  Generall  Historic, 
it  is  evident  that,  if" the  authority  of  that  work  is  overthrown, 
it  will  become  necessary  to  reconsider,  not  merely  the  state- 
ments of  fact  which  rest  only  on  its  assertions,  but  the  whole 
series  of  opinions  which  through  it  have  been  grafted  upon 
history.  Those  statements  and  opinions  have  been  received 
with  unhesitating  confidence  for  more  than  two  hundred  yeai"8. 
There  are  powerful  social  interests,  to  say  nothing  of  popular 
prejudices,  greatly  concerned  in  maintaining  the  credit  of 
Smith's  narrative  oven  at  the  present  day.  No  object  what- 
ever can  be  gjiined  by  discrediting  it,  except  the  establishment 
of  bald  historical  truth.  A  very  strong  case  indeed  must 
therefore  be  made  out  on  the  part  of  Mr.  Deane  and  of  those 
who  follow  him,  before  the  American  public  can  be  induced  to 
listen  with  attention  to  an  argument  which  aims  at  nothing 
less  than  the  entire  erasure  of  one  of  the  most  attractive  por- 
tions of  American  history. 

Captain  John  Smith  belonged  to  the  extraordinary  school 
of  adventurers  who  gave  so  much  lustre  to  the  reign  of  Eliza- 
beth, and  whose  most  brilliant  leader  it  was  one  of  King 
James's  exploits  to  bring  to  the  Tower  and  the  block.  Like 
Italeigh,  though  on  a  much  lower  level,  Smith  sustained  many 
different  characters  ;  he  was  a  soldier  or  a  sailor  indifferently, 
a  statesman  when  circumstances  gave  him  power,  and  an  au- 
thor when  occasion  required.  He  was  born  in  Lincolnshire 
in  1.579,  of  what  is  supposed  to  have  been  a  good  Lancashire 
family.  At  a  very  early  age  he  became  a  soldier  of  fortune  in 
the  Low  Coimtries,  and  seems  to  have  drifted  into  the  Austrian 
service,  where  he  took  part  in  the  campaign  of  IGOO  against 
the  Turks.  Afterwards  he  reai)pears  as  a  soldier  of  the  Prince 
of  Transylvania,  who  gave  hini  a  coat  of  anus,   which  was 

9  M 


194  CAPTAIN  JOHN   SMITH. 

registered  at  the  Herald's  College  in  London.  The  extraordi- 
nary adventures  which  he  met  with  during  the  three  or  four 
years  of  his  life  in  Eastern  Europe  are  related  in  his  Autobi- 
ogi'aphy,  or  "  True  Travels,"  a  work  published  in  London  in 
1630,  near  the  close  of  his  life.  There  is  an  interesting  note 
in  Dr.  Palfrey's  History  of  New  England  (Vol.  L  pp.  89-92) 
which  contains  the  earliest  critical  examination  of  this  portion 
of  Smith's  story  from  an  historical  and  geographical  point  of 
view,  with  a  result  not  on  the  whole  imfavorable  to  Smith, 
although  \inder  reservations  which  admit  a  considerable  degree 
of  doubt  as  to  particulars.  In  the  absence  of  other  authori- 
ties, however,  the  credit  of  the  Autobiography  must  be  left  to 
stand  or  fall  with  that  of  the  Generall  Historie. 

In  1604  Smith  was  again  in  England,  where  he  soon  began 
to  interest  himself  in  the  enterprise  of  colonizing  America. 

On  the  10th  of  April,  1606,  King  James  conferred  a  charter 
upon  certain  persons  in  England,  who  took  the  title  of  the 
Virginia  (company,  and  who  proceeded  to  fit  out  an  expedition 
of  three  small  vessels,  containing,  in  addition  to  their  crews, 
one  hundred  and  five  colonists,  headed  by  a  Coiuicil,  of  whicii 
Edward  Maria  Wingfield  was  chosen  President,  and  Captains 
Bartholomew  Gosnold,  John  Smith,  John  Ratclifte,  John  Mar- 
tin, and  George  Kendall  were  the  other  members.  After  vari- 
ous delays  this  expedition  dropped  down  the  Thames  on  tlie 
20th  of  December  of  the  same  year,  but  was  still  kept  six 
weeks  in  sight  of  Phigland  by  uufavomble  winds.  After  a  long 
and  difficult  voyage,  and  a  further  delay  of  three  weeks  among 
the  West  India  Islands,  tlie  headlands  of  Chesapeake  Bay 
were  passed  on  the  26th  of  April,  1607.  On  the  14th  of  May 
following,  the  colonists  formally  founded  Jamestown. 

But  in  the  mean  while  a  difficulty,  the  true  causes  of  which 
are  not  well  imderstood,  had  created  trouble  between  Smith 
and  his  colleagues.  Smith's  own  story  is  told  in  the  Generall 
Historie  as  follows  :  "  Now  Captain  Smith,  who  all  this  time 
from  their  departure  from  the  Canaries  was  restrained  as  a 
prisoner  upon  the  scaudalous  suggestions  of  some  of  the  chiefe 
(envying  his  repute)  who  faiued  he  intended  to  usurpe  the 


CAPTAIN    JOHN    SMITH.  195 

Govermneut,  murther  the  Couucell,  ami  make  himselfe  King, 
that  his  confederats  were  dispersed  in  all  the  three  ships,  and 
that  divers  of  his  .confedei*ats  that  revealed  it  Avould  affirm  it, 
for  this  he  was  committed  as  a  prisoner :  thirteen  weeks  ho 
remained  thus  suspected,  and  by  that  time  the  ships  should 
returue,  they  pretended  out  of  tiieir  commisserations  to  refer 
him  to  the  Couucell  in  England  to  receive  a  check,  rather  then 
by  particulating  his  designes  make  him  so  odious  to  the  world, 
as  to  touch  his  life,  or  utterly  overthrow  his  reputation." 

The  truth  was,  that  Captain  New^port,  who  was  about  to 
i-eturn  to  England,  exerted  his  influence  so  strongly  in  favor 
of  harmony,  that  Smith  was  allowed  to  resume  his  seat  among 
the  Council.  But  we  are  left  entirely  in  ignorance  of  the  real 
motives  of  Smith's  colleagues,  and  the  evidence,  if  any,  on 
which  they  acted.  One  fact,  however,  is  quite  clear ;  Smith 
was  not  liked  by  the  persons  in  control  of  the  expedition,  and 
it  is  possible  that  some  little  light  on  the  causes  of  this  dislike 
or  suspicion  may  be  found  in  a  passage  of  Wingfield's  "  Dis- 
course," a  w^ork  which  we  shall  hereafter  have  occasion  to 
mention  at  greater  length.  Wingfield,  who  was  one  of  Smith's 
opponents,  says  that  "  it  was  proved  to  his  face  that  he  begged 
in  Ireland,  like  a  rogue  without  a  lycence."  And  he  adds, 
"  To  such  I  would  not  my  name  should  be  a  companyon." 
One  may  imagine  that,  if  Smith  were  really  accused  of  con- 
spiring to  obtain  power,  the  dark  events  and  questionable 
expedients  of  his  varied  and  troubled  career  might  well  be 
flung  in  his  face,  and  produce  a  considerable  influence  on  the 
minds  of  his  judges. 

Harmony,  however,  was  a  blessing  which  was  little  known 
among  the  luihappy  colonists,  and  it  is  worth  noticing  that, 
before  the  close  of  the  year,  Captain  George  Kendall,  another 
of  the  members  of  the  Council,  was  accused  of  the  same  crime 
witJi  which  Smith  had  been  charged,  and  was  tried,  convicted, 
and  actually  executed.  Newport,  who  seems  to  have  had  great 
influence  over  the  colonists,  returned  to  England  on  the  22d 
of  June,  leaving  three  months'  supplies  behind  him,  and  prom- 
ising to  return  in  seven  months  with  a  new  company  of  set- 


190  CAPTAIX   JOHN    SMITH. 

tlere.  His  departure  was  followed  by  a  series  of  disasters  and 
troubles  of  every  description.  The  mortality  was  frightful. 
More  than  forty  deaths  took  place  before  September,  some  of 
which  were  caused  by  fevers  and  sickness,  some  by  the  Indians, 
but  the  larger  number  by  mere  famine.  The  kindness  of  the 
Indians  alone,  if  we  may  believe  the  express  statement  of 
Percy,  who  was  among  thd  survivors,  preserved  the  remaining 
colonists  from  the  fate  of  the  lost  lioanoke  settlement  of 
1585. 

Even  this  teiTible  condition  of  the  colony,  though  during 
five  months  together  there  were  not  five  able-bodied  men  to 
mount  the  defences,  had  no  effect  in  quieting  the  jealousies 
and  dissensions  of  the  leadei"s.  Captain  Gosnold  died,  leaving 
only  Wingfield,  Katcliffe,  Smith,  and  Martin  in  the  Council. 
The  last  three  combined  to  doix^se  Wingfield  ;  and  this  revolu- 
tion took  place  on  the  10th  of  September,  without  resistance, 
Ratcliffe,  as  the  next  in  order,  was  chosen  President,  although 
there  is  strong  reason  to  believe  that  Wingfield  was  the  better 
man. 

It  became  absolutely  necessary  to  obtain  supplies  in  order 
to  preserve  the  lives  of  the  few  remaining  colonists.  "  As  at 
this  time,"  says  Smith,  "  were  most  of  our  chiefest  men  either 
Kicke  or  discontented,  the  rest  being  in  such  despairc  as  they 
would  rather  starve  and  rot  with  idlencs,  then  be  pei-suaded 
to  do  anything  for  their  owne  reliefo  without  constraint :  our 
victualles  being  now  within  eighteene  dayes  spent,  and  the 
Indians  trade  decreasing,  I  was  sent  to  tliomoutli  of  y*  river  to 
trade  for  Corne,  and  try  the  River  for  Fisli,  but  our  fishing  wo 
could  not  effect  by  reason  of  the  stormy  weather."  Fortu- 
nately the  Indians  were  found  willing  to  trade  for  corn,  and  by 
means  of  their  supplies  the  lives  of  the  settlors  were  saved. 
On  the  9th  of  Noveml>er,  Smith  made  a  longer  excursion, 
partially  exploring  the  Chickaliominy,  and  was  received  with 
much  kindness  by  the  Indians,  who  supplied  him  with  corn 
enough  to  have  "laded  a  ship."  Elated  by  his  success  and 
encouraged  by  the  friendly  attitude  of  the  savages,  or,  accord- 
ing to  his  own  account,  eager  "to  discharge  the  imputation 


CAPTAIN   .10IIN    SMITH.  197 

of  nialioions  tungs,  that  halfe  suspected  I  durst  not,  for  so  long 
delaying,"  he  doterniined  to  carry  on  Km  exploration  of  the 
Chickahominj'  to  its  source.  On  the  10th  of  December  he 
set  out  in  the  pinnace,  which  he  left  at  a  place  he  calls  Apocant, 
forty  miles  from  the  mouth  of  the  Chickahominy,  and  continued 
his  journey  in  a  barge.  Finally,  rather  than  endanger  the 
barge,  he  hired  a  canoe  and  two  Indians  to  row  it,  and  with 
two  of  his  own  company,  named  Robinson  and  Emry,  he  went 
twenty  miles  higher.  "  Though  some  wise  men  may  condemn 
this  too  bould  attempt  of  too  much  indiscretion,  yet  if  they 
Avell  consider  the  friendship  of  the  Indians,  in  conducting  me, 
the  descjlatenes  of  the  country,  the  probability  of  [discover- 
ing] some  lake,  and  the  malicious  judges  of  my  actions  at 
home,  as  also  to  have  some  matters  of  worth  to  incourage  our 
adventurers  in  England,  migiit  well  have  caused  any  honest 
minde  to  have  done  the  like,  :is  wel  for  his  own  discharge,  as 
for  the  publike  good." 

At  length  they  landed  to  prepare  their  dinner,  and  Smith 
with  one  Indian  walked  on  along  the  course  of  the  rivei",  wdiile 
Kobinson  and  Emry  with  the  other  Indian  remained  to  guard 
the  canoe.  Within  a  quarter  of  an  hour  he  heard  a  hallooing 
of  Indians  and  a  loud  cry,  and,  fearing  trcacheiy,  he  seized 
his  guide,  whose  arm  he  bound  fast  to  his  own  hand,  while  he 
prepared  his  pistol  for  immediate  use.  As  they  "went  dis- 
coiu-sing,"  an  arrow  struck  him  on  the  right  thigh,  but  without 
harm.  He  soon  found  himself  attacked  by  some  two  hundred 
savages,  against  whose  aiTows  he  used  his  guide  as  a  shield, 
discharging  his  pistol  three  or  four  times.  The  Indian  chief, 
Opechankanough,  then  called  upon  him  to  surrender,  and  the 
savages  laid  their  bows  on  the  groiuid,  ceasing  to  sho(jt.  "  My 
hinde  treated  betwixt  them  and  me  of  conditions  of  peace,  lie 
discovered  me  to  be  the  Captaine,  my  request  was  to  retire  to 
y*  boate,  they  demanded  my  amies,  the  rest  they  saide  were 
slaine,  only  me  they  would  reserve  :  the  Indian  inq)ortuned  me 
not  to  shoot.  In  retiring  being  in  the  midst  of  a  low  (juag- 
njire,  and  minding  them  more  than  my  steps,  I  stejjt  fast 
into  the  quagmire,  and  also  the  Indian  in  drawing  uje  forth  .• 


198 


CAPTAIN   JOHN    SMITH. 


thus  surprised,  I  resolved  to  trie  their  mercies,  my  armes  I 
caste  from  me,  till  which  none  dui*st  approch  me  :  being 
ceazed  on  me  they  di'ew  me  out  and  led  me  to  the  King." 

Thus  fur,  to  avoid  confusion,  we  have  followed  the  account 
given  in  the  True  Relation,  written  by  Smith,  and  published 
in  London  in  1G08,  the  year  following  the  events  described. 
But  in  1624  Smith  published  in  London  his  Gencrall  Historic, 
which  contains  a  version  of  the  story  varying  essentially  from 
that  of  the  True  Relation.  In  continuing,  therefore,  the  ac- 
count of  his  captivity,  the  two  narratives  will  be  placed  side 
by  side,  for  convenience  of  comparison,  and  the  principal 
variations  will  be  printed  in  Italics.  After  describing  the 
circumstances  of  his  capture,  which  took  place  far  up  on  the 
Chickahominy  River,  Smith  proceeds  in  his  double  narrative 
as  follows  :  — 


A  TRUE   RELATION. 
1608. 

"They  drew  me  out  and  led  me 
to  tlic  King,  I  presented  him  with  a 
com|)a.sse  diall  ....  witli  kinde 
siiecchcs  and  bread  he  retjuitcd  me, 
coiidiu'ting  me  wliere  the  Canow  lay 
and  Jolm  Kohinsou  slaine,  with  20 
or  3(1  arrowes  m  him.  Enuy  I  saw 
not,  I  i»eri«'ived  by  the  aboiindance 
of  fir(!S  nil  over  the  woods,  at  earh 
filitre  I  exju-rletl  irlwii  tliei/  voiild  exe- 
cute me,  i/el  iheij  itsctl  tiie  tiulh  tcliat 
hndnvs  they  could:  apiiroaehiiig 
thi!ir  Towue,  whiili  was  within  6 
miles  where  I  was  taken  ....  the 
C'aptaine  <;ondu<ling  me  to  his  lodg- 
ing, a  (|nnrter  of  venison  and  .sonu; 
ten  jionnd  of  bread  1  liad  for  snj)- 
j>er,  what  I  left  was  reserved  for  me, 
and  sent  with  me  to  my  lodging  : 
eaeh  morning  3  women  presented 
me  three  great  jdatters  of  fine 
bread,    uiotv    venison  than  ten   men 


THE   GENERALL   IirsTOKIE. 

1624. 
"  Then  according  to  their  compo- 
sition they  drew  him  forth  and  ieil 
him  to  the  fire  where  his  men  were 
slaine.  Diligently  they  chafed  his 
benummed  limbs.  He  demanding 
for  their  Captaine  the}'  .showed  him 
Oju'chankanough  king  of  I'aniaun- 
kee,  to  whom  he  gave  a  round  ivory 
double  compass  Dyall.  Mncli  they 
marvailed  at  the  jilaying  of  the   Fly 

and  Needle Notinthslandiiiij, 

tnlltiu  an  lioiiie  ajler  llieij  lad  liiiii  to 
a  tree  and  as  natiijl  as  luiild  s,'aiid 
alunil  lam  jne/xaed  to  shoot  /am,  1  at 
the  King  holding  up  the  ('(inipass  in 
his  liand,  tliey  all  laid  down  tlicir 
bowes  an<l  arrowes  and  in  a  Iri- 
nmi'hantnianner  led  him  to  Orapaks 
wliere   he  was   after   their   manr.er 

kindly  feasted  and  well  used 

Smith  they  conducted  to  a  long 
house;  where  thirtie  oi  foilie  tall  fel- 


CAPTAIN   JOHN   SxMITH. 


199 


could  devour  I  had,  my  gowne,  points 
and  garters,  my  compas  and  a  tab- 
let they  gave  me  again,  though  8 
ordinarily  guarded  me,  I  wanted  not 
what  they  could  devise  to  content 
me  •  and  still  our  longer  ac(juaint- 
ance  increased  our  better  atfcction. 
....  I  desired  he  [the  King]  would 
send  a  messenger  to  Paspahegh 
[Jamestown]  with  a  letter  I  would 
write,  by  which  they  shold  under- 
stand, how  kindly  they  used  me, 
and  that  I  was  well,  least  they 
should  revenge  my  death  :  this  he 
granted  and  sent  three  men,  in  such 
weather  a,s  in  reason  were  un possi- 
ble, by  any  naked  to  be  endured. 
....  The  next  day  after  my  letter 
came  a  salvage  to  my  lodging  with 

his  sword  to  have  slaine  me 

this  was  the  father  of  him  I  had 
slayne,  whose  fujy  to  prevent,  the 
King  presently  conducted  me  to  an- 
other Kingdome,  upon  the  top  of 
the  next  northerly  river,  called 
Youghtanan,  having  feasted  me,  he 
further  led  me  to  another  branch 
of  the  river  called  Mattapament,  to 
two  other  hunting  townes  they  led 
nie,  and  to  each  of  these  countries 
a  house  of  the  great  Emperor  of 
Pewhakan,  whom  as  yet  I  supposed 
to  bee  at  the  Fals,  to  him  I  told  him 
1  must  (joe,  and  so  relume  to  Paspa- 
he<jh,  after  this  foure  or  five  dayes 
march,  we  returned  to  Rasawrack, 
the  first  towne  they  brought  me  too, 
where  binding  the  Mats  in  bundles, 
they  marched  two  dayes  journey 
and  crossed  the  river  of  Youghtanan 
Avhere  it  was  as  broad  as  Thames  ; 
so  conducting  me  to  a  place  called 
Menapacute  in  Pamaunke,  where  y" 

King  inhabited 

"  From    hence  this  kind    King 


lowes  did  guard  him,  and  ere  long 
more  bread  and  venison  was  brought 
him  than  would  have  served  twentie 
men.  I  think  his  stomach  a{  that 
time  was  not  very  good  ;  what  he 
left  they  put  in  baskets  and  tj'ed 
over  his  head.  About  midnight 
they  set  the  meat  again  before  him, 
all  this  time  not  one  of  them  would 
eat  a  bit  with  him,  till  the  next 
morning  they  brought  him  as  much 
more,  and  then  did  they  cate  all  the 
olde,  and  reserved  the  newe  as  they 
had  done  the  other,  winch  made 
him  think  they  would  fat  him  to 
eate  him.  Yet  in  this  desperate 
estate  to  defend  him  from  the  cold, 
one  Maocassater  brought  him  hi.s 
gowne  in  requitall  of  some  beads 
and  toyes  Smith  had  given  him  at 
his  first  arrival  in  Virginia. 

' '  Two  dayes  after  a  man  would 
have  slaine  him  (but  that  the  gnaid 
prevented  it)  for  the  death  of  his 
Sonne  to  whom  they  conducted  him 
to  recover  the poore  man  then  breath- 
ing his  last In  part  of  a  Ta- 
ble booke  he  writ  his  minde  to  them 
at  the  Fort,  and  ....  the  messen- 
gers ....  according  to  his  request 
went  to  Jamestowne  in  as  bitter 
weather  as  could  be  of  frost  and 
snow,  and  within  three  dayes  re- 
turned with  an  answer. 

"Then  they  led  him  to  the 
Youthtanunds,  the  Mattaponients, 
the  Payankatanks,  the  Nantaughta- 
cunds,  and  Omawmanients  upon 
the  rivers  of  Rapahannock  and  Pat- 
awomeck,  over  all  those  rivers  and 
back  againe  by  divers  other  severall 
nations  to  the  King's  habitation  at 
Pamaunkce  where  they  entertained 
him  with-most  strange  and  fearfull 
Conjurations 


200 


CAPTAIN   JOHN   SMITH. 


conducted  mee  to  a  place  called 
Topahanocke,  a  kingdome  upon  an- 
other Elver  northward  :  the  cause 
of  this  was,  that  the  yeare  before, 
a  shippe  had  beene  in  the  Eiver  of 
Paniaunke,  who  having  been  kindly 
entertained  by  Powhatan  their  Em- 
l>erour,  they  returned  thence,  and 
discovered  the  River  of  Topahan- 
ocke, where  being  received  with  like 
kindnesse,  yet  he  slue  the  King  and 
tooke  of  his  people,  and  they  sup- 
posed I  were  hee,  but  the  people 
reported  him  a  great  man  that  was 
Captaine,  and  using  mee  kindly,  the 
next  day  we  departetl 

' '  The  next  night  I  lodged  at  a 
hunting  town  of  Powhatams,  and 
the  next  day  arrived  at  Warana- 
conioco  upon  the  river  of  Pa- 
niauncke,  where  the  gi'eat  king  is 
resident 

"Arriving  at  Weramocomoco 
their  Emperour  ....  kindly  wel- 
comed me  with  good  wordes,  and 
great  Plattei-s  of  sundiie  Victuals, 
assiirinfi  mee  his  friendship,  and  my 

lihetiie  within  foure  dayes hee 

desii-ed  mee  to  forsake  Paspahegh, 
and  to  live  with  him  upon  his  River, 
a  Countiie  called  Cnpa  Howa.sicke  : 
hee  p)x)niised  to  give  me  Come, 
Venison,  or  what  I  wanted  to  feede 
us,  Matcliets  and  Copper  wee  should 
make  him,  and  none  should  dis- 
turbe  us.  This  request  1  promised 
to  perfoj-me  ;  and  thus  having  with 
all  the  kindnes  hee  could  devi.se, 
sought  to  content  me  :  hee  sent 
nie  home  icith  4  men,  one  tliat  usu- 
ally carried  my  Oowne  and  Knap- 
sacke  after  me,  two  other  loded 
with  bi-ead,  and  one  to  accompanie 
nie 

"From  Weramocomoeo  is  but  12 


"At  last  they  brought  him  to 
Meronocomoco  where  was  Powha- 
tan their  Emperor.  Here  more  than 
two  hundred  of  those  grim  Courtiers 
stood  wondering  at  him,  as  he  had 
been  a  monster  ;  till  Powhatan  antl 
his  trayne  had  put   themselves  in 

their  greatest  braveries At 

his  entrance  before  the  King,  all  the 
l)eople  gave  a  great  shout.  The 
Queene  of  Appamatuck  was  ap- 
iwinted  to  bring  him  water  to  wash 
his  hands,  and  another  brought  hun 
a  bunch  of  feathers,  in  stead  of  a 
Towell  to  dry  them  :  having  feasted 
him  ajler  their  best  barbarous  manner 
they  could,  a  lotuj  consultation  teas  held, 
but  the  conclusion  was,  two  great  stones 
were  brought  before  Powhatan :  then 
as  many  as  could  layd  hands  on  him, 
dragged  him  to  them,  and  thereon  laid 
his  head,  and  being  ready  with  their 
clubs,  to  beate  out  his  hrahies,  Poai- 
hontas  the  Kings  dearest  daughter, 
when  no  intreaty  could  prevade,  got  his 
head  in  her  amies,  and  laid  her  owne 
upon  his  to  save  him  from  death: 
whereat  the  Emperour  was  contented  he 
should  lii^c  to  make  him  hatchets,  and 
her  bells,  beads  and  copper 

' '  Two  dayes  after,  Powhatan  hav- 
ing disguised  himselfe  in  the  most 
fearfuUest  manner  he  could  .... 
more  like  a  devil  than  a  man  with 
some  two  hundred  more  as  blacke 
as  himselfe,  came  unto  him  and  told 
him  now  they  were  friends,  and 
presently  he  should  goe  to  James- 
towiie,  to  send  him  two  gi-eat 
gunnes  and  a  gryndstone,  for  which 
he  would  give  Iiim  the  Country  of 
Capahowosick,  and  for  ever  esteeme 
him  as  his  sonne  Nantaquoud.  So 
to  Jamestowne  with  12  guides  Pow- 
hatan sent  him,  he  still  expecting  {as 


CAPTAIN   JOHN   SMITH. 


201 


miles,  yet  tlie  Indians  trifled  away 
that  day,  and  would  not  goe  to  our 
Forte  by  any  perswasions  :  but  in 
certaine  olde  hunting  houses  of  Pas- 
pahegli  we  lodged  all  night.  The 
next  morning  ere  Sunne  rise,  we 
set  forward  for  our  Foit,  where  we 
arrived  within  an  houre,  where  each 
man  with  truest  signes  of  joy  they 
could  expresse  welcomed  mee,  ex- 
cept M.  Archer,  and  some  2  or  3 
of  his,  who  was  then  in  my  absence, 
sworne  Counsellour,  though  not 
with  the  consent  of  Captame  Mar- 
tin :  great  blame  and  imputation 
was  laide  upon  mee  by  them,  for  the 
losse  of  our  two  men  which  the  In- 
dians slew :  insomuch  that  they 
jtuqiosed  to  depose  me,  but  in  the 
midst  of  mi/  viisei'ics,  it  pleased  God 
to  send  Captaine  Nuport,  who  cnriving 
there  the  same  nhjht,  so  tripled  our  joy, 
as  for  a  while  these  plots  against  me 
were  deferred  though  with  much 
malice  against  me,  which  captain 
Newport  in  short  time  did  plainly 
see." 


he  had  done  all  this  lom/  time  of  his 
imprisonment)  every  houre  to  Ite  put  to 
one  death  or  other :  for  all  their  feast- 
ing. But  almightie  God  (by  his  di- 
vine providence)  had  mollified  the 
hearts  of  those  sterne  Barbarians 
with  compassion.  The  next  morn- 
ing betimes  they  came  to  the 
Fort 

"  Now  in  Jamestowne  they  were  all 
in  combustion  the  strongest  preparing 
ones  more  to  run  away  with  the  Pin- 
nace ;  ivhich  icith  the  hazzard  of  his 
life,  with  Sabre  falcon  and  musket  shot, 
Smith  forced  now  the  third  time  to  stay 
or  siiike.  Some  Jio  better  than  they 
should  be,  had  plotted  with  the 
President,  the  next  day  to  have  put 
him  to  death  by  the  Leviticall  law, 
for  the  lives  of  Robinson  and  Emry, 
pretending  the  fault  was  his  that 
had  led  them  to  their  ends  :  but  he 
(piickly  tooke  such  order  with  such  law- 
yers, that  he  layd  them  by  the  lieeles  till 
he  sent  some  of  them  prisoners  far 
England 

"  Newport  got  in  and  aiiived  at 
James  Towne  not  long  after  the  re- 
demption of  Captaine  Smith 

"Written  by  Thomas  Studley, 
the  first  Cape  Merchant  in  Virginia, 
Robert  Fenton,  Edward  Harrington, 
and  J.  S." 


The  instant  result  of  comparing  the  two  narratives  thus  for 
tlic  first  time  phiced  side  by  side,  is  to  bring  into  sharp  promi- 
nence a  certain  curious  tone  of  exaggeration  which  character- 
izes the  later  story.  Eight  guards,  which  had  been  sufficient 
in  1608,  are  multiplied  into  thirty  or  forty  tall  fellows  in  1624. 
What  was  enough  for  ten  men  at  the  earlier  time  would  feed 
twenty  according  to  the  later  version.  Four  guides  were 
surely  an  ample  escort  to  conduct  Smith  to  Jamestown,  but 
9* 


202  CAPTAIN   JOHN   SMITH. 

they  are  reinforced  to  the  number  of  twelve  sixteen  yeara 
afterwards.  With  the  best  disposition  towards  Smith,  one 
cannot  but  remember  that  this  was  just  the  period  when 
Falstaff  and  his  misbegotten  knaves  in  Kendal  Green  ap- 
peared upon  the  stage.  The  execution  wrought  upon  the 
wretched  lawyers  who  wished  to  try  Smith  for  his  life  on  his 
return  to  Jamestown  is  most  prompt  and  decisive,  according 
to  the  story  of  1624,  but  in  1608  Smith  is  happy  to  accept  the 
aid  of  Captain  Newport  to  disembarrass  him  of  his  too-power- 
ful enemies.  With  sabre,  falcon,  and  musket-shot  he  forced 
the  mutinous  crew  of  the  pinnace  to  stay  or  sink,  if  we  are  to 
believe  the  Generall  Historic,  while  the  True  Relation  is  quite 
silent  as  to  any  such  feat  of  arms,  but  simply  observes  that 
Captain  Newport  arrived  the  same  evening. 

The  same  character  of  exaggeration  marks  the  whole  ac- 
count of  the  treatment  he  received  among  the  savages. 
According  to  the  story  written  a  few  months  after  the  event, 
a  people  is  described,  savage  it  is  true,  but  neither  cruel  nor 
bloodthirsty ;  reckless,  perhaps,  of  life  in  battle,  but  kind 
and  even  magnanimous  towards  their  captive.  Here  is  an  ex- 
press statement  that  no  such  demonstration  was  made  against 
Smith  as  is  affirmed  in  1624,  to  have  taken  place  within  an 
hour  after  his  capture.  Only  a  few  da3's  after  he  was  taken 
prisoner,  he  represents  himself  as  giving  orders  to  Opechanka- 
nough  to  take  him  to  Powhatan,  and  even  at  this  time  ho 
knew  that  he  was  to  be  allowed  to  return  to  Jamestown.  "  To 
him  I  told  him  I  must  go,  and  so  return  to  Paspahegh."  Pow- 
hatan received  him  with  the  greatest  cordiality,  and,  having 
sought  to  content  liim  with  all  the  kindness  he  could  devise, 
did  actually  send  him  with  a  guard  of  lionor  back  to  his 
friends.  If  the  True  Relation  is  really  true,  the  behavior  of 
these  naked  barbarians  towards  Smith  was  far  more  humane 
than  that  which  he  would  have  received  at  the  hands  of 
any  civilized  nation  on  the  face  of  the  earth.  There  is  not 
a  trace  of  his  having  felt  any  immediate  fear  for  his  life,  ex- 
ce{)t  from  a  savage  whoso  son  he  had  killed,  and  from  whom 
Opechankanougli  protected  him.     One  line   indeed  occiirs  to 


CAPTAIN   JOHN    SMITH.  203 

the  eflFect  that  they  fed  him  so  fat  as  to  make  him  much  doubt 
they  meant  to  sacrifice  him  ;  and  this  paragraph  furnishes  the 
most  striking  evidence  of  the  kindness  of  the  Indians,  and  of 
tiie  fact  that  he  believed  himself  to  have  been  mistaken  in 
having  entertiained  the  suspicion.  Yet  in  1624  we  learn  that 
throughout  his  long  imprisonment  he  was  still  expecting  every 
hour  to  be  put  to  one  death  or  another. 

These  variations  wo'ild  be  of  little  consequence  to  the  ordi- 
nary reader  of  the  colonial  history,  if  they  stopped  at  trifling 
inconsistencies.  They  would  merely  prove,  what  is  almost 
self-evident,  that  the  earlier  narrative  is  the  safer  authority  for 
historians  to  follow,  and  that  the  confidence  which  has  hitherto 
bee  n  felt  in  the  exactness  of  the  Generall  Historic  cannot  be 
altogether  maintained.  But  there  is  one  particular  point  in 
the  text  where  every  American  who  has  heretofore  enjoyed 
the  most  favorite  story  in  the  early  annals  of  his  country  will 
stop  with  a  feeling  of  wonder  and  a  desire  to  doubt  the  evi- 
dence of  his  eyes.  When  he  comes  to  the  paragraph  in  which 
the  Generall  Historic  relates  the  touching  story  of  Pocahontas, 
and  her  intercession  at  the  momejit  of  Smith's  extremest  peril, 
and  when  he  turns  to  the  opposite  column  of  the  True  Rela- 
tion to  find  its  version  of  the  incident,  he  will  surely  be 
amazed  to  see  not  only  that  it  fails  to  furnish  the  remotest 
allusion  to  this  act,  or  even  by  a  single  word  to  indicate  that 
Pocahontas  so  much  as  existed,  but  that  it  expressly  asserts 
the  remarkable  kindness  with  which  Powhatan  treated  his 
captive  and  assured  him  at  once  of  his  early  liberation. 

No  American  needs  to  learn  that  this  tale  of  Pocahontas  is 
probably  the  most  romantic  episode  in  the  whole  history  of  his 
country.  Her  name  and  story  are  familiar  to  every  school- 
boy, and  there  are  even  families  Avhose  greatest  pride  is  to 
trace  their  descent  from  the  Emperor's  daughter  that  saved 
the  life  of  Captain  John  Smith.  Perhaps  this  feeling  is  based 
on  admiration  of  the  heroism  and  rare  qualities  of  the  Indian 
child,  though  her  character  as  a  princess  of  blood  royal  may 
ofter  a  certain  attraction  to  some  of  her  descendants  even  in 
our  own  day.     In  the  general  enthusi;\iim,  language,  and  per' 


204  CAPTAIN   JOHN   SMITH. 

haps  common  sense,  have  been  a  little  strained  to  describe  h-^r 
attributes.  Her  beauty  and  wild  grace,  her  compassion  and 
disinterestedness,  her  Christian  life  and  pure  character,  have 
been  dwelt  upon  with  warm  affection,  which  is  the  more  natvi- 
ral  as  the  childhood  of  the  nation  has  furnished  little  latitude 
to  the  imagination.  One  after  another,  all  American  histori- 
ans have  contented  themselves  with  repeating  the  words  of  the 
Generall  Historic,  vying  with  each  other  in  heaping  praises 
which  no  critics  were  cynical  enough  to  gainsay,  now  on  the 
virtues  of  Pocahontas,  and  now  on  the  courage  and  constancy 
of  Smith. 

The  unquestioning  ftiith  with  which  this  narrative  has  been 
hitherto  received  is  well  shown  by  a  quotation  from  the  work 
which  ranks  as  the  standard  authority  for  American  history. 
In  the  early  editions  of  Mr.  Bancroft's  "  History  of  the 
United  States,"  we  read  the  following  version  of  Smith's 
adventure : — 

"The  gentle  feelings  of  humanity  are  the  same  in  every  race,  and 
in  every  period  of  life ;  they  l)loom,  though  unconsciously,  even  in 
the  bosom  of  a  child.  Smitli  had  easily  won  the  confiding  fondness 
of  the  Indian  maiden ;  and  now,  the  impulse  of  mercy  awakened 
witliin  her  breast,  she  clung  firmly  to  his  neck,  as  his  head  was 
bowed  to  receive  the  strokes  of  the  tomahawk.  Did  tiie  childlike 
superstition  of  her  kindred  reverence  her  interference  as  a  token 
from  a  superior  power?  Her  fearlessness  and  her  entreaties  per- 
suaded the  council  to  spare  the  agreeable  stranger,  who  might  make 
hatchets  for  her  father,  and  rattles  and  strings  of  beads  for  herself, 
the  favorite  child.  The  b.arbarian.s,  whose  decision  had  long  been 
held  in  .suspense  by  the  mysterious  awe  which  Smith  had  inspired, 
now  resolved  to  receive  him  as  a  friend,  and  to  make  him  a  partner 
of  their  councils.  Tliey  tempted  him  to  join  their  bands,  and  lend 
assistance  in  an  attack  upon  the  white  men  at  Jamestown  ;  and  when 
Ills  decision  of  character  succeeded  in  changing  the  current  of  their 
thought-s,  they  dismissed  him  with  mutual  promi.ses  of  friendship  and 
benevolence." 

In  a  note  appended  to  these  paragraphs  the  author 
quotes  :  — 

"Sniitli,  I.  loH-KJ-J.  and  11.  2U-:V.].     The  account  is  fully  con- 


CAPTAIN   JOHN   SMITH.  205 

tained  in  the  oldest  book  printed  on  Virginia,  in  our  Cambridge 
library.  It  is  a  thin  quarto,  in  black-letter,  by  John  Smith,  printed 
in  1608,  —  A  True  Eelation,  &c." 

One  sees  at  a  glance  that  the  story,  in  passing  through  the 
medium  of  Mr.  Bancroft's  mind,  has  gained  something  which 
did  not  helong  to  the  original,  or  helonged  to  it  only  in  a 
modified  degree.  The  spirit  of  Smith  has  infused  itself  into 
the  modern  historian,  as  it  had  already  infused  itself  into 
the  works  of  his  predecessors.  The  lights  arc  intensified  ;  the 
shadows  deepeiied  ;  the  gradations  softened  ;  the  copy  sur- 
passes its  model.  This  tendency  is  carried  so  far  that  the 
author  quotes  the  True  Relation  as  the  full  authority  for  what 
is  only  to  be  found  in  the  Generall  Historic,  if  indeed  it  is  all 
to  be  found  even  there.  When  Mr.  Bancroft  made  the  careful 
collation  of  his  own  version  of  the  story  with  the  black-letter 
pamphlet  in  the  Cambridge  library,  the  brilliant  popular  i-epu- 
tation  of  Smith  had  already  created  an  illusion  in  his  mind 
resembling  the  optical  effect  of  refracted  light.  He  saw  some- 
thing which  did  not  exist,  the  exaggerated  image  of  a  figure 
beyond. 

No  one,  however,  has  now  a  right  to  triumph  over  the 
error.  The  time  has  gone  by  when  the  mistake  contained  in 
this  note  could  be  made  use  of  to  point  any  attack  upon  the 
merits  of  Mr.  Bancroft's  work,  or  upon  the  soundness  of  his 
study  ;  he  has  himself  corrected  his  own  blunder,  and  in  his 
last  editions,  since  1860,  another  note  has  been  substituted  in 
the  place  of  the  one  already  quoted.  It  stands  at  present  aa 
follows  :  — 

"The  rescue  of  Smith  by  Pocahontas  was  told  with  authority  in 
1617,  in  Smith's  'Relation  to  Queen  Anne';  Historie,  127.  It  is 
confirmed  in  his  New  England's  Trials,  printed  in  1622;  and  the  full 
narrative  is  to  be  found  in  the  Historie.  printed  in  1624.  In  1625, 
Purchas,  who  had  many  manuscripts  on  YirEcinia,  gives  the  narrative 
a  place  in  his  Pilgrims,  as  unquestionably  authentic.  Compare 
Deane's  note  on  Wingfield,  31,  32." 

From  a  critical  point  of  view,  this  statement  of  the  case 
may  be  open  to  objection  as  well  as  the  other.     If  it  is  to 


206  CAPTAIN   JOHN   SMITH. 

be  understood  as  a  defence  of  Smith,  strict  critical  justice 
woixld  require  that  the  existence  of  some  accusation  should  be 
mentioned,  its  nature  noticed,  and  its  authority  given.  If  it 
is  not  intended  as  a  defence,  but  merely  indicates  a  doubt  in 
the  author's  own  mind,  which  he  wishes  to  place  with  its  cor- 
rective before  his  readers,  without  laying  too  much  stress  upon 
it,  exact  accuracy  demands  a  softening  in  the  assertion  of 
facts.  It  is  unfortunate,  too,  that,  as  the  note  now  stands, 
the  ordinary  reader,  who  is  not  directed  to  the  Archseologia 
Americana,  may  be  led  to  suppose  that  Mr.  Deane,  whose 
edition  of  Wingfield  seems  to  have  caused  the  alteration,  is 
referred  to  in  support  of  Smith  and  of  Mr.  Bancroft.  But  it 
is  no  part  of  our  purpose  to  dwell  upon  these  small  and  of 
course  caccidental  mistakes,  which  would  not  have  been  worth 
mentioning  except  to  illustrate  the  tyrannical  sway  still  exer- 
cised by  Smith  over  the  intelligence  of  the  country. 

The  quiet  iuA'estigations  of  Mr.  Deane  have,  however,  now 
made  it  necessary  for  historians  to  meet  this  difficulty.  They 
must  either  rely  upon  the  testimony  of  Smith  concerning  mat- 
ter of  his  own  pereonal  experience,  and  upon  the  prescription 
of  two  centuries  in  favor  of  his  story,  or,  rejecting  the  author- 
ity hitherto  considered  unquestionable,  the}'  nuist  undertake 
the  reconstruction  of  this  whole  history  out  of  original  mate- 
rial hitherto  considered  as  merely  auxiliary  to  Smith's  uaiTa- 
tivc.  Unfortunately,  there  is  no  possibility  of  compromise  in 
the  dispute.  Cautious  as  the  expressions  of  Mr.  Deane  are, 
and  unwilling  as  he  evidently  is  to  treat  the  reputation  of 
Smith  with  harshness,  it  is  still  perfectly  clear  that  the  state- 
ments of  the  Generall  Historic,  if  proved  to  be  untrue,  are 
falsehoods  of  a  rare  cffi'ontcry. 

The  argument  against  the  Generall  Historic  does  not  rest, 
however,  upon  the  text  of  the  True  Relation  alone.  Properly 
speaking,  this  is  only  the  cause  of  a  discussion  which  has 
rapidly  spread  itself  over  the  whole  field  of  contemporaneous 
history.  Kven  Mr.  Deanc's  publications  do  not  yet  (piite 
cover  all  the  disputed  ground,  and  probably  future  students 
will  be  able  to  throw  fresh  light  upon  the  question  from 
sources  now  iniknown. 


CAPTAIN  JOHN   SMITH.  207 

The  original  Virginia  Colony  was  so  incongruous  in  compo- 
sition, its  sufferings  were  so  severe,  and  its  disasters  so  fre- 
quent, that  in  the  course  of  a  very  few  years  sevei-al  entirely 
different  classes  of  men  came  upon  the  scene,  and  each  to  some 
extent  effaced  the  memory  of  its  predecessor.  Of  these,  many 
leaders  besides  Smith  have  left  records  of  more  or  less  in- 
terest, though  the  most  important  of  all,  the  papers  of  the 
Company  itself,  are  mostly  lost.  It  is  even  a  considerable  un- 
dertaking to  go  through  the  mass  of  these  dociiments,  and  to 
cull  out  the  isolated  passages  which  bear  upon  the  point  now 
in  dispute  ;  but  here  we  have  fortunately  the  assistance  of  Mr. 
Deane's  notes,  which  leave  little  to  be  desired. 

It  has  ali-eady  been  mentioned  that  the  first  President  of  the 
Colony  was  Edward  Maria  Wingfield,  who,  in  September,  1607, 
was  deprived  of  his  office  and  placed  in  confinement  by  Smith, 
and  the  other  members  of  the  Council.  When  Newport  — 
who,  with  a  new  company  of  settlers,  arrived  at  Jamestown  on 
the  8th  of  January,  1G08,  immediately  after  Smith's  release 
—  set  out  on  his  second  return  voyage  to  London,  he  took  the 
deposed  President  Wingfield  with  him,  and  they  arrived  safely 
at  Blackwall  on  the  21st  of  May.  Wingfield  appears  to  have 
kept  a  sort  of  a  diary  during  his  stay  in  Virginia,  and  after  his 
return  he  wrote  with  its  assistance  a  defence  of  himself  and 
his  administration,  which  seems  to  have  been  privately  circu- 
lated in  manuscript,  and  at  a  later  period  itsed  by  Purchas,  but 
afterwards  was  forgotten  and  hidden  in  the  dust  of  the  Lambeth 
Library.  From  this  obscurity  it  was  at  length  drawn  by  Mr. 
Deane,  who  published  a  copy  of  it  with  notes  in  the  fourth 
volume  of  the  Archseologia  Americana  in  1860.  Excepting  a 
few  papers  of  little  consequence,  this  is  the  earliest  known 
writing  which  comes  directly  from  the  Colony.  The  manu- 
script of  Smith's  True  Relation,  which  is  its  only  possible 
rival,  could  not  have  reached  England  before  the  month  of  July, 
while  the  Discourse  appears  to  have  been  intended  for  imme- 
diate circulation  in  May  or  June.  Wingfield's  work,  which  is 
called  "  A  Discourse  of  Virginia,"  is  therefore  a  new  authority 
on  the  early  history  of  the  Colony,  and  has  peculiar  value  as 


208  CAPTAIN  JOHN   SMITH. 

a  means  of  testing  the  coirectness  of  the  True  Relation,  and 
as  furnishing  some  idea  of  what  was  thought  and  said  by  the 
party  jealous  of  Smith's  influence.  Its  accoinit  of  Smith's 
captivity  could  only  have  been  gained  from  his  own  mouth,  or 
from  those  to  whom  he  told  the  story,  and  the  more  accurate 
it  is,  the  closer  it  should  coincide  with  the  True  Relation. 

There  are  a  number  of  passages  in  this  short  pamphlet 
which  would  be  well  worth  extracting ;  but  the  question  as  to 
Smith's  veracity  had  for  the  present  best  be  narrowed  to  the 
evidence  in  regard  to  Pocahontas,  and  we  will  only  quote  the 
passage  from  Wingfield  which  tells  of  Smith's  adventures 
among  the  Indians. 

"  Doc.  The  10th  of  December,  Mr.  Smith  went  up  the  ryver  of 
the  Chechohomynies  to  trade  for  corne.  He  was  desirous  to  see  the 
heade  of  that  river ;  and  when  it  was  not  passible  with  the  shallop, 
he  hired  a  cannoAV  and  an  Indian  to  carry  liim  up  further.  The 
river  the  higher  grew  worse  and  worse.  Then  lie  went  on  shoare 
with  his  guide  and  left  Robinson  and  Enuiiery,  twoe  of  our  men  in 
the  cannow ;  which  were  [)resontly  .slaine  by  tlie  Indians,  Pama- 
onke's  men,  and  he  himself  taken  prysoner;  and  by  the  means  of  his 
guide  his  lief  was  saved ;  and  Pamaonche  haveing  him  prisoner, 
carryod  him  to  his  neybors  wyroances  to  see  if  any  of  them  knewe 
him  for  one  of  those  which  had  bene,  some  two  or  three  yeres  be- 
fore us,  in  a  river  amongst  them  Northward,  and  taken  awaie  some 
Indians  from  them  by  force.  At  last  lie  brouglit  him  to  the  great 
Powaton  (of  wlionie  befoi-e  wee  had  no  knowk'dg)  wlio  sent  him 
home  to  our  towne  the  viii""  of  January 

"Mr.  Archer  sought  how  to  c.ill  Mr.  Smith's  lief  in  question  and 
had  indited  him  upon  a  chapter  in  Leviticus  for  the  death  of  his  twoe 
men.  lie  had  had  his  tryall  the  same  dale  of  liis  retorne,  and  I  be- 
lieve his  hanging  the  same  or  the  next  daie,  so  speedie  is  our  law 
there.  But  it  pleased  God  to  send  Captn.  Newport  unto  us  tlie 
same  evening  to  our  unspeakable  comfort,  whose  arrival]  saved  Mr. 
Smyth's  life  and  mine." 

Mr.  Deane,  in  editing  this  work  of  Wingfield's,  in  1860,  fur- 
nished a  note  upon  this  passage,  in  which  ibr  the  first  time,  so 
far  08  we  are  aware,  a  doubt  was  thrown  upon  the  story  of 
Pocahontas's  intervention.  Yet  the  discovery  of  Wingfield's 
narrative  adds  little  to  the  evidence  contained  in  the  'I'rue 


CAPTAIN   JOIIX    SMITH.  209 

Relation,  which  has  always  been  a  well-known  work.  From 
the  Discourse  we  learn  few  new  facts.  It  supplies  precise 
dates,  fixing  Smith's  departure  on  the  10th  of  December,  and 
his  return  on  the  8th  of  January,  so  that  we  now  know  that 
his  absence  w^as  exactly  four  weeks  in  length.  It  says  that 
Smith's  guide  saved  his  life,  which  may  or  may  not  be  a  vari- 
ation from  the  story  of  the  True  Relation.  It  states  rather 
more  strongly  the  danger  Smith  ran  from  the  enmity  of 
Archer,  which  may  perhaps  have  been  only  the  result  of  Wing- 
field's  own  dislike  of  that  person.  But,  in  general,  this  new 
piece  of  evidence,  though  clearly  independent  of  the  True 
Relation,  confirms  it  in  all  essential  points,  and  especially  in 
the  entire  omission  of  any  reference  to  Pocahontas.  It  is 
highly  improbable  that  so  remai-kable  an  incident  as  her  pro- 
tection of  Smith,  if  known  to  Wingfield,  should  not  have  been 
mentioned  in  this  nan'ative,  which,  it  may  fairly  be  assumed, 
contained  the  current  version  of  Smith's  adventures,  as  told 
auxmg  the  colonists  after  his  i-eturn  to  Jamestown. 

These  two  works  are  the  only  actually  contemporaneous  au- 
thority for  the  events  of  the  first  year  of  the  colonial  history. 
There  is  a  wide  gap  between  them  and  the  next  work  from 
which  we  can  quote  ;  and  indeed  the  strength  of  Mr.  Deane's 
casj  rests  so  largely  on  the  negative  evidence  oftered  by  the 
True  Relation  and  the  Discourse,  that  for  his  purpose  it  was 
scai'cely  necessary  to  go  further.  Every  one,  whether  believ- 
ing or  disbelieving  the  Generall  Historic,  must  agree  that  Poca- 
hontas was  not  mentioned,  either  by  name  or  by  implication, 
in  the  account  given  of  Smith's  captivity,  either  in  the  True 
Relation  or  in  Wingfield's  Discourse.  If  the  matter  in  dispute 
were  of  little  consequence,  the  inquiry  might  stop  here,  and 
each  reader  might  be  left  to  form  his  own  opinion  as  to  the 
truth,  or  the  relative  value  as  authority,  of  the  conflicting 
nanatives.  But  the  interest  of  the  question  requires  an  ex- 
haustive statement.  We  shall  therefore  return  to  the  history 
of  Smith  and  of  the  Colony,  which  has  been  interrupted  for 
the  purpose  of  explaining  the  difficulty  which  the  publications 
of  Mr.  Deaue  have  raised. 


210  CAPTAIN   JOHN   SMITH. 

Newport  returned  to  England  on  the  10th  of  April,  1G08, 
carrying  Wingfield  with  him,  and  leaving  KatclifFe  President 
of  the  Colony,  with  Martin,  Smith,  and  Archer  in  the  Council, 
together  with  a  new  member,  Matthew  Scrivener,  who  iiad 
arrived  with  Newport.  Smith  in  June  explored  successfully  a 
part  of  Chesapeake  Bay,  and,  returning  on  the  21st  of  July, 
found,  according  to  the  Genei-all  Historic,  the  colonists  in  a 
miserable  condition,  luiable  to  do  anything  but  comi)lain  of 
Ratcliffe,  whose  principal  oftencc  appears  to  have  been  his 
obliging  the  colonists  to  build  him  "  an  uimecessaiy  building 
for  his  pleasvu'e  in  the  woods."  Ratcliffe,  whose  real  name  was 
Sicklemore,  appears  to  have  been  really  a  poor  creature,  if  the 
evidence  in  regard  to  him  can  be  believed.  He  was  now  de- 
posed, and  Scrivener,  Smith's  "  deare  friend,"  though  then 
exceedingly  ill,  succeeded  him  as  President.  This  revolution 
was  rapidly  effected  ;  for  three  da3-s  later,  on  the  24th  of  July, 
Smith  again  set  out,  with  twelve  men,  to  finish  his  explorations, 
and  made  a  complete  tour  round  the  bay,  which  supplied  his 
materials  for  the  map  published  at  Oxford  in  1G12.  He  did 
not  return  to  Jamestown  till  the  7th  of  September,  and  on  the 
10th  assumed  the  Presidency,  "by  the  Election  of  the  Coun- 
cell,  and  request  of  the  Company."  Scrivener  appears  merely 
to  have  held  tlie  office  during  Smith's  pleasure,  and  voluntarily 
resigned  it  into  his  hands. 

The  history  of  Smith's  administration  of  the  Colony  from 
the  10th  of  September,  1G08,  till  the  end  of  September,  1  GOD,  is 
given  in  the  CJencrall  Historic,  and  may  be  studied  with  great 
advantage  as  an  example  of  Smith's  style.  It  abounds  in 
praise  of  the  President,  combined  with  vigorous  attacks  upon 
every  cue  else,  from  the  authorities  in  England  down  to  the 
laborers  at  Jamestown.  Wo  will  not  even  try  to  draw  a  line 
between  truth  and  fictirni  in  this  part  of  his  story.  Whatever 
may  have  been  the  merits  of  his  govermnent,  it  is  certain  that 
he  had  no  better  success  than  his  predecessors,  and  that  he  not 
only  failed  to  command  obedience,  but  that  he  was  left  almost 
or  quite  without  a  friend.  He  was  ultimately  deposed  and  sent 
to  England  under  articles  of  complaint.     The  precise  tenor 


CAPTAIN  JOHN   SMITH.  211 

of  these  articles  is  unknown ;  but  the  indefatigable  Mr.  Deane 
has  unearthed,  in  the  Colonial  Office  a  letter  of  Ratcliffe,  alias 
Sicklemore,  dated  4th  October,  1G09,  in  which  he  announces 
to  the  Lord  Treasurer  that  "  this  man  [Smith]  is  sent  home  to 
answerc  some  misdemeanors  whereof  I  perswade  me  he  can 
scarcely  clear  himselfe  from  great  imputation  of  blame."  Be- 
yond a  doubt,  the  difficulties  of  the  situation  were  very  great, 
and  the  men  Smith  had  to  conti'ol  were  originsxUy  poor  mate- 
rial, and  were  made  desperate  by  their  trials  ;  but  it  is  equally 
certain  that  his  career  in  Virginia  terminated  disastrously,  both 
for  himself  and  for  the  settlement.  The  Virginia  Company, 
notwithstanding  his  applications,  never  consented  to  employ 
him  again. 

The  Colony  went  on  from  bad  to  worse.  George  Percy,  a 
brother  of  the  Earl  of  Northumberland,  succeeded  Smith  in 
the  Presidency.  The  condition  of  the  colonists  between 
Smith's  departure  in  October,  1609,  and  the  arrival  of  Sir 
Thomas  Gates,  in  May,  1610,  was  terrible.  Percy  "was  so 
sicke  hee  could  neither  goe  nor  stand."  Ratcliffe,  with  a  num- 
ber of  others,  was  killed  by  Indians.  The  remainder  fed  on 
roots,  acorns,  fish,  and  actually  on  the  savages  whom  they 
killed,  and  on  each  other,  one  man  murdering  his  wife  and 
eating  her.  Out  of  the  whole  number,  said  to  have  been  five 
hundred,  not  more  than  sixty  were  living  when  Gates  arrived  ; 
and  that  the  situation  was  beyond  hope  is  proved  by  the  fact 
that  Gates  immediately  took  them  on  board  ship,  and,  aban- 
doning Jamestown,  set  sail  for  England.  It  was  only  an 
accident  that  they  fell  in  with  a  new  expedition  under  Lord 
Delaware  at  the  mouth  of  the  river,  who  brought  with  him  a 
year's  provisions,  and  restored  the  fortunes  of  the  settlement. 
In  spite  of  the  discouragement  produced  in  England  by  the 
news  of  these  disasters,  the  Company  renewed  its  efforts,  and 
again  sent  out  Sir  Thomas  Gates  with  six  vessels  and  three 
hundred  men,  who  arrived  in  August,  1611.  The  government 
was  now  in  the  hands  of  Sir  Thomas  Dale,  who  had  assumed 
it  in  May,  1611,  and  retained  it  till  1616.  If  the  ultimate 
success  of  the  Colony  was  due  to  any  single  man,  the  merit 


212  CAPTAIN   JOHN   SMITH. 

appears  to  belong  to  Dale  ;  for  his  severe  and  despotic  nile 
crushed  the  insubordination  that  had  been  the  curse  of  the 
state,  compelled  the  idle  to  work,  and  maintained  order  be- 
tween the  Colonists  and  the  Indians.  But  whatever  were  the 
merits  or  the  faults  of  the  government  subsequent  to  the 
abandonment  of  Jamestown  and  the  practical  destruction  of 
the  first  colony  in  May,  1610,  it  is  indisputable  that  previous 
to  that  time  nothing  could  have  been  worse  than  the  manage- 
ment of  the  settlement ;  and  it  is  evident  that  the  hoiTors  of 
the  winter  of  1G09-10  must  have  had  their  causes  in  the 
misfortunes,  or  the  mistakes,  or  the  incompetency  of  Wingfield, 
Ratcliffe,  and  Smith.  That  the  colonists,  after  so  long  a  trial, 
were  still  dependent  for  their  bread  on  the  Indians  and  on 
supplies  from  England,  could  scarcely  have  been  the  fault  of 
any  but  themselves,  and  could  not  be  excused  by  throwing  the 
blame  of  their  improvidence  upon  the  distant  board  of  direc- 
tors in  London. 

In  the  mean  while  Smith,  who  had  taken  his  final  leave  of 
the  Colony,  appears  to  have  led  a  quiet  life  in  London  during 
several  years.  But  he  was  not  a  man  to  be  crushed  by  any 
disaster.  The  point  in  Smith's  character  which  really  com- 
mands admiration,  although  it  habitually  caiised  him  to  neglect 
his  nearer  duties,  is  the  spirit  of  adventure  which  nothing  could 
quench,  and  the  energy  in  action  which  often  overtasked  his 
resources  and  caused  his  disasters.  Although  we  lose  sight 
of  him  during  the  years  IGIO  and  1611,  we  again  find  him  in 
1612  busied  in  the  same  direction  as  before.  In  this  year  he 
published  at  Oxford  a  short  work  called  "  A  Map  of  Virginia. 
With  a  Description  of  the  countrey,  the  Commodities,  People, 
Govennnent,  and  Religion.  Written  by  Captaine  Smith,  some- 
times Governour  of  the  Countrey.  Whercunto  is  annexed  the 
proceedings  of  those  Colonies  <tc.  by  W.  S."  This  latter  part 
of  the  publication,  which  purports  to  be  drawn  from  the 
writings  of  certain  colonists,  was  afterwards  reprinted,  with 
altenitions,  as  the  Third  Book  of  the  Generall  Historic,  from 
the  title  of  which  it  appears  that  W.  S.  stood  for  the  initials 
of  one  William  Simons,  Doctor  of  Divinity. 


CAPTAIN  JOHN   SMITH.  21o 

There  is  in  the  text  of  this  tract  only  one  passage  bearing 
upon  the  point  now  principally  in  dispute.  Among  the  cus- 
toms which  he  describes  as  peculiar  to  the  Indians  was  the 
form  of  execution  practised  against  criminals.  Their  heads, 
he  says,  were  placed  upon  an  altar,  or  sacrificing-stone,  while 
"one  with  clubbes  beates  out  their  braines."  During  his  cap- 
tivity, he  adds,  not  indeed  that  he  had  actually  seen  this  mode 
of  execiition,  but  that  an  Indian  had  been  beaten  in  his  pres- 
ence till  he  fell  senseless,  without  a  cry  or  complaint.  Here 
is,  therefore,  the  whole  idea  of  the  story  which  he  afterwards 
made  public.  Practised  lawyers  may  decide  whether,  luider 
the  ox'dinary  rules  of  evidence,  this  passage  amounts  to  a  posi- 
tive implication  that  he  had  himself  not  been  placed  in  the 
position  described,  or  it  may  perhaps  be  possible  for  future 
students  to  explain  why  Smith  should  have  suppressed  his  own 
story,  supposing  it  to  have  been  true.  The  inference  is  very 
strong  that,  if  anything  of  the  sort  had  ever  occurred,  it 
would  certainly  have  been  mentioned  here,  and  this  argument 
is  considei'ably  strengthened  by  a  short  narration  of  the  facts 
of  his  imprisonment,  given  in  the  second  part  of  the  pam- 
phlet, for  which  Dr.  Simons  is  the  nominal  authority.  This 
version  is  as  follows  :  — 

"  A  month  those  barbarians  kept  him  prisoner,  many  strange  tri- 
umphs and  conjurations  they  made  of  him,  yet  lie  sj  demeened  him- 
self amongst  them  as  he  not  only  diverted  them  from  surprising 
the  fort,  but  procured  his  own  liberty,  and  got  himself  and  his  com- 
pany such  estimation  among  them  that  those  savages  admired  him 
as  a  Demi  God.  So  returning  safe  to  the  Fort,  once  more  stayed  the 
pinnace  her  flight  for  England." 

This  work  was,  as  above  stated,  afterwards  reprinted, 
under  the  author's  name,  as  the  Third  Book  of  the  Generall 
Historic.  The  passage  just  quoted  is  there  reproduced  with 
the  evidently  intentional  substitution  of  "  six  or  seven  weekes  " 
for  "  a  month,"  as  in  the  original.  In  the  Generall  Historie 
the  concluding  paragraph  is  omitted,  and  in  its  place  stands, 
—  "  The  manner  how  they  used  and  delivered  him,  is  as  fol- 
loweth."     And  then,  breaking  abruptly  into  the  middle  of  the 


214  CAPTAIN   JOHN   SMITH. 

old  narrative,  the  story  which  has  been  quoted  at  such  length 
Avas  interpolated. 

The  narrative  in  the  second  part  of  the  Map  of  Virginia, 
of  which  the  above  extract  forms  a  part,  is  signed  by  the  name 
of  Thomas  Studley  alone,  while  in  the  Generall  Historic  the 
enlarged  account  bears  also  tlie  signatures  of  Edward  Hai*- 
rington,  Robert  Fenton,  and  Smith  himself.  A  question  may 
arise  as  to  the  extent  to  which  these  persons  should  be  con- 
sidered as  dividing  with  Smith  the  responsibility  for  the  story. 
Thomas  Studley,  however,  died  on  the  28th  of  August,  1(J07. 
Both  he  and  Edward  Han'ington  had  lain  four  mouths  in  their 
graves  before  Smith  ever  had  heard  of  Powhatan  or  Pocahontas. 
The  date  of  Robert  Fenton's  death  is  not  so  clear,  but  there 
is  no  reason  to  suppose  that  he  had  any  share  in  the  narration 
of  events  which  Smith  alone  witnessed. 

The  argument  so  far  as  the  Oxford  tract  is  concerned  would 
therefore  seem  to  be  strong  enough,  even  if  it  went  no  further. 
But  it  becomes  irresistible  when  we  find  that  this  tract  not 
only  mentions  Pocahontas,  but  actually  introduces  her  in  the 
role  of  guardian  angel  and  saviour  of  Smith's  life,  although  it 
says  no  word  of  her  most  famous  act  in  this  character.  The 
allusion  occiu's  towards  the  end  of  the  pamphlet,  where  the 
assumed  writer  takes  occasion  to  defend  Smith  against  certain 
charges,  one  of  them  being  an  alleged  scheme  on  his  part  of 
marrying  Powhatan's  daughter  Pocahontas  in  order  to  accjuire 
a  claim  to  the  throne.  The  writer  denies  the  charge,  and 
adds  :  — 

"  It  is  true  slie  wai?  the  very  nonpareil  of  his  kingdome  and  at 
mcst  not  past  13  or  14  yeares  of  age.  Very  often  slice  came  to  our 
fort  with  what  shee  could  get  for  Captaine  Smith,  that  ever  loved 
and  used  all  the  countrio  well,  but  her  especially  he  ever  much  re- 
spected :  and  she  so  well  requited  it  that  when  her  father  mtended 
to  have  surprised  him,  shee  by  stealth  in  the  darke  night  came 
through  the  wild  woods  and  told  him  of  it." 

This  Oxford  tract  of  1G12  may  l)e  considered  as  decisive  of 
the  fact  that,  down  to  that  dale,  the  story  of  Pocahontas  had 
not  been  made  public.     We  are  obliged  to  confess  that  no 


CAPTAIN  JOHN   SMITH.  215 

explanation  whatever,  consistent  with  an  assumption  of  the 
truth  of  the  later  narrative,  occurs  to  the  mind  to  account 
for  Smith's  continued  silence  so  long  after  his  connection  with 
the  Colony  had  ceased. 

Here  we  take  leave  of  Smith,  as  an  authority,  for  a  period 
of  some  ten  years,  during  which  he  published  but  one  work, 
not  relating  to  the  present  subject.  But  an  entirely  new  class 
of  colonists  had,  in  IGIO  and  IGll,  taken  the  place  of  the 
first  settlers,  almost  exterminated  by  the  disasters  of  1G09  -  10. 
Among  the  new-comers  there  arrived  in  the  train  of  Lord 
Delaware,  in  IGIO,  a  certain  William  Strachey,  who  held  the 
office  of  Secretary  of  the  Colony.  Little  is  known  of  Strachey, 
except  that,  after  his  return  to  England,  he  com2)iled  a  work 
called  the  "  Historic  of  Travaile  into  Virginia,"  never  com- 
pleted in  its  original  plan,  but  still  extant  in  two  neatly  written 
manuscripts,  and  printed  by  the  Hakluyt  Society  in  1849. 
The  date  of  its  composition  was  probably  about  the  year  1G15. 
It  consists  largely  of  extracts  from  Smith's  jirevious  works, 
though  without  acknowledgment  of  their  origin ;  but  it  also 
contains  original  matter,  and  especially  some  curious  references 
to  Pocahontas.  (See  Deane's  edition  of  the  True  Relation, 
p.  72.)  There  is,  however,  no  reference,  direct  or  indirect,  to 
her  agency  in  saving  Smith's  life,  and  no  trace  of  the  high 
esteem  which  such  all  act  would  have  won  for  her. 

Next  in  order  after  Strachey's  manuscript,  we  have  a  work 
which  is  quite  original,  and  which  gives,  perhaps,  the  best  ac- 
count of  the  Colony  ever  made  public  by  an  eye-witness.  This 
is  a  small  volume  in  quarto,  printed  in  London  in  1G15,  and 
called  "  A  True  Discourse  of  the  Present  Estate  of  Virginia 
....  till  the  18th  of  June,  1614,  together  with  ....  the 
Christening  of  Powhatan's  daughter  and  her  Marriage  with  an 
Englishman.  Written  by  Raphe  Hamor,  late  Secretario  in 
the  Colonic."  In  it  we  find  a  minute  and  graphic  story  how 
"  Pocahuntas,  King  Powhatan's  daughter,  whose  fame  has 
spread  even  to  England  under  the  name  of  Nou  Parella," 
while  staying  with  some  tribe,  subject  to  her  father,  on  the 
Potomac,  was  seized  and  carried  away  by  Captain  Argol,  who 


216  CAl'TAIN   JOHN   SMITH 

had  sailed  up  that  river  on  a  trading  expedition.  Hev  impris- 
onment as  a  hostage  at  Jamestown,  her  visit  to  her  father's 
residence  with  Sir  Thomas  Dale  and  a  strong  force  of  English, 
Powhatan's  failure  to  redeem  her,  and  her  subsequent  marriage 
to  John  Rolfe,  on  the  5th  of  April,  1G13,  are  all  circumstan- 
tially narrated ;  and  finally  an  exti-emely  interesting  account 
is  given  of  a  visit  which  Harnor  made  to  Powhatan,  and  of  the 
conversation  he  had  with  that  extraordinary  savage.  Besides 
this  work  of  Hamor,  the  volume  also  contains  several  letters 
from  persons  in  Virginia,  one  of  which  is  by  John  Rolfe  him- 
self, written  with  the  single  object  of  justifying  his  marriage. 
Afterwards,  when  the  arrival  of  Pocahontas  in  England  had 
excited  an  interest  throughout  Euroi)e  in  lier  story,  Hamor's 
book  was  translated  and  published  in  (Germany. 

Although  there  are  repeated  allusions  to  Pocahontas  in  the 
works  already  mentioned,  it  is  in  Hamor  that  she  makes,  for 
the  first  time,  her  appearance  as  a  ])ersou  of  political  impor- 
tance. In  the  True  Relation,  Smith  represented  her  as  a 
pretty  and  clever  child  of  ten  years  old,  who  was  once  sent 
with  a  trusted  messenger  by  I'owhatan  to  the  fort  to  entreat 
the  liberation  of  some  Indians  whom  Smitli  had  seized.  Tlir 
Oxford  tract  mentions  her  as  a  friend  of  Smith's,  but  a  mere 
child.  Strachey  gives  a  curious  description  of  her  intimate 
relations  with  the  Colony  during  his  residence  there.  "  Poca- 
huntas,  a  well  featured  but  wanton  yong  girle,  Powhatan's 
daughter,  sometymes  resorting  to  our  fort,  of  the  age  then  ol' 
eleven  or  twelve  yeares,  would  get  the  boyes  forth  with  her 
into  the  markett  place,  and  make  them  wljcele,  falling  on  their 
hands,  turning  up  their  heeles  upwards,  whome  she  would  fol- 
lowe  and  wheele  so  her  self,  naked  as  she  was,  all  the  fort 
over."  All  this  seems  to  indicate  tl>at  she  was  considered 
merely  as  a  child,  wliose  age  made  her  a  general  favorite. 
But  from  the  time  when  Argol  treacherously  seized  her,  she 
occupied  an  important  position,  in  the  first  place  as  the  guar- 
anty of  a  peace  which  Powhatan  promised,  and  seems  to  have 
faithfully  preserved  during  the  remainder  of  her  life  and  of  his 
own  ;  in  the  second  place  as  a  person  well  calculated  to  excite 


CAPTAIN   JOHN   SMITH.  217 

interest  in  England  in  behalf  of  the  Colony ;  and,  finally,  as 
an  eminent  convert  to  the  English  Church,  through  whom  a 
powerful  religious  influence  might,  it  was  believed,  be  exer- 
cised among  her  father's  subjects.  Hamor's  book  is  filled  with 
her  history,  and  RolfG's  letter  shows  much  anxiety  to  prove 
the  propriety  of  his  course  in  marrying  her.  Both  writers 
■wei'e  interested  in  exciting  as  much  sympathy  for  her  as  could 
be  roused.  Yet  neither  the  one  nor  the  other  alludes  in  any 
manner  to  the  act  which  has  since  become  her  first  claim  to 
praise,  and  in  the  light  of  which  the  rest  of  her  story  has  been 
almost  thrown  out  of  sight.  There  is  no  reason  to  suppose 
that  in  Virginia  at  this  time  the  persons  best  informed  were 
yet  aware  that  Pocahontas  had  ever  saved  Smith's  life. 

In  the  month  of  June,  1G16,  Sir  Thomas  Dale  arrived  at 
Plymouth,  on  his  return  home,  bringing  with  him,  among  his 
Suite,  the  baptized  Pocahontas,  now  called  Rebecca  Rolfe,  who, 
with  her  husband  and  child,  came  at  the  charge  of  the  Com- 
pany to  visit  England,  and  to  prove  to  the  world  the  success 
of  the  Colony.  She  became  at  once  the  object  of  extraordi- 
nary attention,  and  in  the  following  winter  she  was  the  most 
distinguished  person  in  society.  Her  portrait,  taken  at  this 
time,  still  exists,  and  shows  a  somewhat  hard-featured  figure, 
with  a  tall  hat  and  ruff,  appearing  ill  at  ease  in  the  stift"  and 
imgraceful  fashions  of  the  day.  Gentlemen  of  the  court  sent 
the  engraving,  as  the  curiosity  of  the  season,  in  their  letters 
to  correspondents  abroad.  The  Church  received  her  with  great 
honor,  and  the  Bishop  of  London  gave  her  an  entertainment, 
celebrated  in  enthusiastic  terms  by  Purchas.  At  the  court 
masque,  in  January,  1617,  she  was  among  the  most  conspicu- 
ous guests.  The  king  and  queen  actually  received  her  in 
special  audiences ;  and  to  crown  all,  tradition  reports,  with 
reasonable  foundation,  that  King  James,  in  his  zeal  for  the 
high  principles  of  divine  right  and  the  sacred  character  of 
royalty,  expressed  his  serious  displeasure  that  Rolfe,  who  was 
at  best  a  simple  gentleman,  should  have  ventured  so  far  be- 
yond his  position  as  to  ally  himself  witii  one  who  was  of 
imperial  blood. 

10 


218  CAPTAIN   JOHN   SMITH. 

Just  at  this  time,  when  the  influence  of  London  society  had 
set  its  only  too  decisive  stamp  of  fasiiion  on  the  name  of  the 
Indian  girl,  and  when  King  James  had  adopted  her  as  right- 
fully belonging  within  the  pale  of  the  divinity  that  hedges  a 
king,  — just  at  this  moment  Samuel  Purchas,  "  Parson  of  St. 
Martin's  by  Ludgate,"  published  the  thii'd  edition  of  his  "  Pil- 
grimage." The  excellent  Purchas,  although  not  himself  an 
explorer,  was  an  enthusiast  on  the  subject  of  travels  and 
adventures,  and  in  compiling  the  collection  which  is  now  so 
eagerly  sought  and  so  highly  valued  by  collectors  of  books  he 
had,  so  far  as  related  to  Virginia,  the  direct  assistance  of  per- 
sonal witnesses,  and  also  of  manuscripts  now  unhappily  lost 
except  for  his  extracts.  He  was  well  acquainted  with  Smith, 
who  "gently  communicated"  his  notes  to  him,  and  who  was 
now  in  London,  and  visited  Pocahontas  at  Brentford.  Purchas 
himself  saw  Pocahontas.  He  was  present  when  "my  Hon"**- 
and  Rev^'  Patron  the  Lord  Bishop  of  London,  D'  King,  en- 
tertained her  with  festivall  state  and  pompe  beyond  what  I 
have  seen  in  his  great  hospitalitie  afforded  to  other  ladies,"  iu 
his  "  hopefull  zeale  by  her  to  advance  Christianitie."  He  knew 
Tomocomo,  au  Indian  of  Powhatan's  tribe,  who  came  with  her 
to  England.  "  With  this  savage  I  have  often  conversed  at  my 
good  friend's  Master  Doctor  Goldstone,  where  he  was  a  fre- 
quent guest ;  and  where  I  have  both  seen  him  sing  and  dance 
his  diabolicall  measures  and  heard  him  discourse  of  his  coun- 
trey  and  religion.  Sir  Thomas  Dale's  man  being  the  interpre- 
tour."  Ho  knew  Rolfe  also,  who  lent  him  his  manuscript 
discourse  on  Virginia,  Yet  in  Purchsis's  book  no  allusion  can 
be  found  to  the  heroic  intervention  on  behalf  of  Smith,  the 
story  of  whose  cajitivity  is  simply  copied  from  Simons's  quarto 
of  1012  ;  the  diffuse  comments  on  men  and  manners  in  Vir- 
ginia contain  no  trace  of  what  would  have  been  correctly 
regarded  as  the  most  extraordinary  incident  in  colonial  his- 
tory. 

Silence  in  a  single  instance,  as  in  Wingfiold  or  in  Strachey, 
might  be  accounted  for,  or,  at  all  events,  might  be  overlooked. 
But  in  the  course  of  this  examination  we  have  found  silence 


CAriAIN   JOHN   SMITH.  219 

absolute  during  a  long  period  of  years  and  under  the  most 
improbable  circimistances.  AVingfield,  Smith  himself,  Simons, 
Strachey,  Haraor,  Rolfe,  and  Purchas,  all  the  authorities,  with- 
out exception,  known  to  exist,  are  equally  dumb  when  (jues- 
tioned  as  to  a  circumstance  which,  since  1624,  has  become  tlio 
most  famous  part  of  colonial  history.  The  field  is  literally 
exhausted.  There  exist  no  other  sources  frona  which  to  draw  au- 
thentic information.  Nothing  remains  but  to  return  to  Smith, 
and  to  inquire  when  it  was  that  this  extraordinary  story  first 
made  its  appeai'ance,  and  how  it  obtained  authority. 

The  blaze  of  fashionable  success  that  surrounded  Pocahon- 
tas in  London  lights  \\p  the  closing  scene  of  her  life.  It  is 
said  that  she  was  obliged,  against  her  will,  to  set  out  on  her 
return  to  Virginia,  bx;t  she  never  actually  left  the  shores  of 
England.  Detained  in  the  Thames  by  several  weeks  of  con- 
trary winds,  her  failing  strength  altogether  gave  way ;  and  in 
March,  1G17,  in  the  poor  word-play  of  Piu'chas,  "she  came  at 
Gravesend  to  her  end  and  grave."  Her  father,  Powhatan,  sur- 
vived her  less  than  a  year. 

Smith,  in  the  mean  while,  was  busied  with  projects  in  regard 
to  New  England  and  the  fisheries.  His  efforts  to  form  a  col- 
ony there  and  to  create  a  regular  system  of  trade  had  very 
little  success  ;  but  to  spread  a  knowledge  of  the  new  country 
among  the  people  of  England,  he  printed,  in  1616,  a  small 
quarto,  called  "A  Description  of  New  England,"  and  in  1620 
he  published  another  pamphlet,  entitled  "New  England's 
Trials,"  a  second  and  enlarged  edition  of  which  appeared  in 
1622.  Here,  at  last,  in  1622,  we  find  the  long-sought  allusion 
to  his  captivity,  in  the  following  words  :  — 

'■  For  wronging  a  soldier  but  the  value  of  a  penny  I  have  caused 
Powhatan  send  his  own  men  to  Jamestowne  to  receive  their  punish- 
ment at  my  discretion.  It  is  true  in  our  greatest  extremitie  they 
shot  me,  slue  three  of  my  men,  and  by  the  folly  of  them  that  fled, 
took  me  prisoner ;  yet  God  made  Pocahontas  the  King's  daughter 
the  means  to  deliver  me ;  and  thereby  taught  me  to  know  their 
treacheries  to  preserve  the  rest." 


220  CAPTAIN   JOHN   SMITH. 

This  in  order  of  time  is  the  third  version  given  by  Smith 
of  his  own  adventure,  the  account  in  the  Generall  Historie 
being  the  fourth.  Each  of  these  four  stories  is  more  or  less 
inconsistent  with  all  the  others;  but  this  of  1622  is,  we  are 
Sony  to  say  it,  more  certainly  mendacious  than  any  of  the 
rest.  Read  it  in  whatever  light  we  please,  it  is  creditable  nei- 
ther to  Smith's  veracity  nor  to  his  sense  of  honor.  "  By  the 
folly  of  them  that  fled,"  he  now  states  that  the  Indians  suc- 
ceeded in  capturing  him.  All  the  other  versions  agi'ee  in  this, 
that  at  the  time  Smith  was  attacked  and  his  two  men  slain  he 
was  (juite  alone,  except  for  his  Indian  guide,  whom  he  used  as 
a  shield.  To  throw  upon  the  invented  cowardice  of  compan- 
ions who  were  far  awa}',  out  of  sight  and  out  of  heai'ing  of  the 
contest,  the  blame  for  a  disaster  which  was  solely  due  to  his 
own  over-boldness,  was  not  an  honorable  way  of  dealing  with 
his  command.  Perhaps  it  would  be  better  to  leave  this  point 
unnoticed,  in  deference  to  Smith's  real  merits,  but  unfortu- 
nately this  is  not  the  only  passage  in  his  works  in  which  the 
same  tendency  is  apparent. 

Nevertheless,  the  fact  remains,  that  here  for  the  first  time 
the  stoiy  of  Pocahontas  appears  in  print.  *'  God  made  Poca- 
hontas the  means  to  deliver  me."  The  devout  form  is  charac- 
teristic of  the  age,  though  the  piety  of  a  man  like  Suiith,  if 
his  autobiography  gives  a  true  idea  of  his  course  of  life,  nuist 
have  been  a  curious  subject  for  study.  But  for  those  who 
assume,  with  Mr.  Deanc,  that  the  agency  of  Pocahontas  is  a 
])ure  invention,  this  paragraph  becomes  doubly  interesting,  as 
showing  to  what  a  degree  of  quaint  dignity  the  Elizabethan 
age  could  rise,  even  in  falsehood. 

The  fii'st  ai)pearance  of  this  famous  story  can  therefore  be 
fixed  with  snfticient  certaitrty  within  five  j'ears  between  1017 
and  1022,  although  the  published  accoimt  in  all  its  complete- 
ness is  oidy  to  be  found  in  the  (Jouerall  Historic,  printed  in 
1624,  from  which  such  copious  extracts  have  already  been 
quoted  as  to  make  any  further  allusion  \umece8sary.  There 
remains  only  one  poiut  of  difficulty  requiring  attention  iu  this 
work. 


CAPTAIN   JOHN   SMITH.  221 

Smith  has  there  stated  (pp.  121  -123)  that,  when  Pocahon- 
tas came  to  England,  he  wrote  for  lier  a  sort  of  letter  of  intro- 
duction to  the  Queen,  or,  in  his  own  words,  "  a  little  booke  to 
this  effect  to  the  Queen,  an  abstract  whereof  folio weth." 

"  Some  ten  yeeres  agoe,  being  in  Virginia  and  taken  prisoner  by 
the  power  of  Powhatan  their  cliiefe  King  ....  I  cannot  say  I  felt 
the  least  occasion  of  want  that  was  in  tlie  power  of  those  my  mor- 
tal! foes  to  prevent,  notwithstanding  al  their  threats.  After  some 
si.x  weeks  fatting  amongst  those  Salvage  Courtiers,  at  the  minute  of 
my  execution,  she  hazarded  the  beating  out  of  her  owne  braines  to 
save  mine,  and  not  onely  that,  but  so  prevailed  with  her  father,  that 
I  was  safely  conducted  to  Jamestowne." 

If  Smith  really  wrote  this  statement  to  the  Queen,  and  the 
Queen  received  the  letter,  the  case  unquestionably  becomes 
even  more  complicated  than  before.  But  the  fact  is,  that  the 
letter  itself  rests  on  the  authority  of  the  Generall  Historie, 
and  has  neither  more  nor  less  weight  than  the  other  state- 
ments in  that  work.  It  is  by  no  means  necessary  to  believe 
that  this  *'  abstract  of  the  effect "  of  the  little  book  is  freer 
from  interpolations  than  the  te.xt  of  tlie  Generall  Historie 
elsewhere.  At  the  time  it  was  published,  in  1624,  not  only 
had  Pocahontas  long  been  dead,  but  Queen  Anne  hei*self  had, 
in  1(519,  followed  her  to  the  grave,  and  Smitli  remained  alone 
to  tell  his  own  story.  The  Virginia  Company  certainly  had 
no  interest  in  denying  the  truth  of  a  story  so  admirably  cal- 
culated to  draw  popular  sympathy  towards  the  Colony.  But 
even  if  it  be  gi'anted  that  Smith's  letter  as  it  stands  was  really 
sent  to  the  Queen,  the  argument  against  its  truth,  so  far  as  it 
is  based  on  the  silence  of  all  previous  authorities,  is  left  quite 
untouched  ;  and  if  there  is  no  conclusive  evidence  to  prove 
that  the  story  was  unknown  in  1617,  it  is  at  least  equally  difh- 
cidt  to  pi'ove  that,  if  known,  it  was  believed.  Smith's  charac- 
ter was  certainly  a  matter  of  warm  dispute  in  his  own  day, 
and  his  enemies  seem  to  have  been  too  numerous  and  strong 
for  even  his  energy  and  perseverance  to  overcome.  No  more 
decisive  wdtness  on  this  point  is  needed  than  Thomas  Fuller, 
himself  one  of  Smith's  contemporaries,  whose  "  Worthies  of 


222  CAPTAIN  JOHN   SMITH. 

England  "  first  appeared  some  thirty  years  after  Smith's  death, 
when  the  civil  wars  had  intervened  to  obliterate  the  recol- 
lection of  all  personal  jealousies,  and  when  Smith  himself 
must  have  been  almost  as  little  remembered  as  he  is  to-day. 
Fuller  devotes  a  page  to  his  history  in  the  following  vein  :  — 

"  From  the  Turks  in  Europe  he  passed  to  the  Pagans  in  America 
where,  towards  the  latter  end  of  tlie  reign  of  Queen  Elizabeth,  such 
his  perils,  preservations,  dangers,  deliverances,  they  seem  to  most 
men  above  belief,  to  some  beyond  truth.  Yet  have  we  two  witnesses 
to  attest  them,  the  prose  and  the  pictures,  both  in  his  own  book ; 
and  it  soundeth  much  to  the  diminution  of  his  deeds  that  he  alone 
is  the  herald  to  publish  and  proclaim  them." 

The  essential  evidence  on  each  side  of  this  curious  question 
has  now  been  exhausted,  althojigh  it  would  he  easy  to  argue 
indefinitely  in  regard  to  Smith's  general  character.  This  must 
indeed  be  done  by  the  first  historian  who  attempts  again  to 
deal  with  the  history  of  the  Virginia  Colony,  But  although 
the  argument  has  been  stated  fairly,  and  may  now  be  left  for 
future  and  final  judgment,  some  reasonably  clear  theory  is 
still  required  to  explain  the  existence  of  the  story  now  as- 
sumed to  be  false.  If  Mr.  Deane  had  departed  a  little  farther 
than  he  has  done  from  his  sphere  of  work  as  an  editor,  and 
given  the  result  of  his  studies  in  a  more  general  fo)-m,  his 
deep  acquaintance  with  the  subject  would  have  made  his  ccm- 
clusions  particularly  valuable.  As  it  is,  he,  like  Dr.  Palfrey, 
only  hints  that  Smith,  in  tlie  latter  part  of  his  life,  had  fallen 
into  the  hands  of  hack-writers,  who  adapted  his  story  for  pop- 
ular effect.  Perhaps,  if  we  may  vcnttu'e  to  guess  at  his  real 
opinion,  the  view  lie  would  be  inclined  to  take  might  be  some- 
what as  follows. 

The  examination  of  Smith's  works  has  shown  that  his  fiiuxl 
naiTJitive  was  the  result  of  gradual  additions.  The  influence 
exercised  by  Pocahontas  on  the  affairs  of  the  Colony,  according 
to  the  jvccount  given  in  1608,  wjis  very  slight.  In  1G12  she 
first  appears  in  her  heroic  character.  Her  capture  and  her  mar- 
riivge  to  Uolfe  gave  her  importance.  Her  visit  to  England, 
however,  made  her  beyond  question  the  most  conspicuous  fig- 


CAPTAIN   JOHN   SMITH.  223 

lire  in  Virginia,  and  it  became  inevitable  that  romantic  inci- 
dents in  her  life  vvonld  be  created,  if  they  did  not  already 
exist,  by  the  mere  exercise  of  the  popular  imagination,  attracted 
by  a  wild  and  vigorous  picture  of  savage  life. 

The  history  of  the  emperor's  daughter  became,  as  we  are 
led  by  Smith  to  suppose,  a  subject  for  the  stage.  Nothing 
was  more  natural  or  more  probable.  It  is  not  even  necessary 
to  assume  that  Smith  himself  invented  the  additions  to  his 
original  story.  He  may  have  merely  accepted  them  after  they 
had  obtained  a  strong  and  general  hold  on  the  minds  of  his 
contemporaries. 

In  the  mean  while  Smith's  own  career  had  failed,  and  his 
ventures  ended  disastrously,  while  in  most  cases  he  did  not 
obtain  the  employment  which  he  continued  to  seek  with  unre- 
laxed  energy.  In  1622,  however,  a  great  disaster  occun-ed  in 
Virginia,  which  roused  the  greatest  interest  and  sympathy  in 
England,  and  gave  occasion  for  renewed  efforts  in  behalf  of  the 
Colony.  The  Indians  rose  against  the  English,  and  in  the 
month  of  May  a  terrible  massacre  took  place  around  James- 
town. The  opportunity  was  not  one  to  be  lost  by  a  man  who, 
like  Smith,  while  burning  to  act,  was  still  smarting  under 
what  he  considered  undeserved  neglect,  and  he  at  once  has- 
tened to  offer  his  services  to  the  Company,  with  a  plan  for 
restoring  peace  ;  but  his  plan  and  his  offer  of  services  were 
again  declined.  Still,  the  resource  of  which  he  had  already 
made  such  frequent  use  remained,  and  by  publishing  the  Gen- 
erall  Historie  he  made  a  more  ambitious  appeal  to  the  public 
than  any  he  had  yet  attempted.  In  this  woi-k  he  embodied 
everything  that  could  tend  to  the  increase  of  his  own  reputa- 
tion, and  drew  material  from  every  source  which  could  illus- 
trate the  history  of  English  colonization.  Pocahontas  was 
made  to  appear  in  it  as  a  kind  of  stage  deity  on  every  possible 
occasion,  and  his  own  share  in  the  affairs  of  the  Colony  is  mag- 
nified at  the  expense  of  all  his  companions.  None  of  those 
whose  reputations  he  treated  with  so  much  harshness  appeared 
to  vindicate  their  own  characters,  far  less  to  assert  the  facts  in 
regard  to  Pocahontas.     The  effort  indeed  failed  of  its  object, 


224  CAPTAIN   JOHN    SMITH. 

for  he  remained  unemployed  and  without  mark  of  distinction. 
"  He  led  his  old  age  iu  London,  where  his  having  a  Prince's 
mind  imprisoned  in  a  poor  man's  purse  rendered  him  to  the 
contempt  of  such  who  were  not  ingenuous.  Yet  he  eftbrted 
his  spirits  with  the  remembrance  and  relation  of  what  formerly 
he  had  been  and  what  he  had  done."  So  Fuller  writes,  who 
might  have  known  him  in  his  later  years.  He  died  quietly  in 
his  bed,  in  London,  in  June,  1631  ;  his  will  is  extant,  and  has 
been  published  by  Mr.  Deaue,  but  furnishes  little  new  informa- 
tion ;  in  the  absence  of  criticism,  due  perhaps  to  the  political 
excitement  of  the  times,  his  book  survived  to  become  the 
standard  authority  on  Virginian  history.  The  readiness  w^ith 
which  it  was  received  is  scarcely  so  remarkable  as  the  credu- 
lity which  has  left  it  unquestioned  almost  to  the  present  day. 


THE  BANK  OF  ENGLAND  EESTRICTION. 

1797-1821* 

DURING  the  eighteenth  century  the  mechanism  of  trade 
had  been  elaborated  in  Great  Britain  to  a  high  point  of 
perfection.  London  had  become  in  a  great  degree  the  centre 
of  commerce  for  the  whole  world,  while  the  Bank  of  England 
was  the  business  centre  of  London.  But  the  Bank  had  a 
double  sphere  of  usefulness.  As  a  private  corporation,  it  ex- 
ercised, not  less  by  the  high  character  of  its  directors  than  by 
the  amount  of  its  capital  and  the  privileges  of  its  charter,  a 
great  influence  over  all  foreign  and  domestic  trade.  By  com- 
mon agreement,  its  notes  circulated  within  London  to  the 
exclusion  of  all  other  bank -paper.  Its  discounts  represented 
at  that  time  a  far  greater  proportion  of  the  active  capital  of 
England  than  they  now  do.  But  its  operations  were  not 
restricted  within  the  limits  of  ordinary  banking ;  it  was  also 
a  recognized  official  agent.  As  a  national  establishment,  it 
issued  the  coin,  managed  the  debt,  took  charge  of  government 
deposits,^  and  made  advances  to  the  Exchequer  and  the  Treas- 
ury, on  security  of  Exchequer  Bills.  In  the  same  capacity,  it 
was  expected  to  perform  the  difficult  duty  of  maintaining  a 
supply  of  gold,  not  merely  for  circulation,  but  in  anticipation 
of  any  sudden  drain  or  panic,  which  might  cause  a  run  upon 
the  other  banking  institutions  of  the  country.  It  was  obliged, 
therefore,  to  purchase  at  a  fixed  rate  all  the  gold  which  was 
brought  to  its  counters,  Thiis,  as  a  bank  of  discount,  it  held 
the  exclusive  privilege  of  discounting  government  paper ;  as  a 

*  From  the  North  American  Review  for  October,  1867. 
10*  O 


226  THE   BANK   OF   ENGLAND   RESTRICTION. 

bank  of  deposit,  it  alone  held  the  public  balances ;  as  a  bank 
of  issue,  its  circulation  alone  passed  through  the  hands  of  the 
government  as  well  as  of  the  public.  Its  notes,  when  not 
issued  in  loans  on  Exchequer  Bills  to  the  government,  or  in 
payment  for  the  precious  metals  as  already  mentioned,  could 
only  pass  into  circulation  through  the  medium  of  discounts 
furnished  to  merchants.  Neither  then,  nor  at  any  time,  has 
the  Bank  had  other  than  these  three  means  of  issuing  its 
paper ;  and  as  it  is  clear  that,  so  far  as  the  second  is  con- 
cerned, no  notes  could  be  sent  out  which  did  not  represent 
their  equivalent  in  coin  or  bullion  brought  in,  the  only  possi- 
ble mode  of  issuing  an  excess  of  paper  must  have  been  either 
by  loans  to  the  government  on  security  of  Exchequer  Bills,  or 
in  regular  and  legitimate  commercial  discounts. 

All  foreign  and  most  provincial  payments  were  ultimately 
settled  by  drafts  on  London.  But  the  country  merchants  and 
others,  who  had  occasion  in  this  manner  to  extend  their  con- 
nections beyond  the  limits  of  a  district,  usually  found  it  con- 
venient to  deal  through  the  local  bankers  of  their  neighbor- 
hood, rather  than  to  draw  upon  correspondents  of  their  own. 
In  1797,  there  were  about  three  hundred  and  fifty  such 
country  banks  in  England  and  Wales,  most,  if  not  all,  of 
which  were  banks  of  issue  ;  and  as  they  were  always  liable  to 
be  called  upou  to  redeem  their  notes  either  in  gold,  in  Bank 
of  England  notes,  or  iu  bills  of  exchange  drawn  on  London,  it 
is  evident  tliat  their  circulation  was  subject  to  all  the  varia- 
tions of  the  London  money-market. 

Besides  this  practical  check,  yet  another  control  was  ex- 
ercised by  the  Bank  of  England  over  the  credit  operations  of 
the  counti-)-.  Every  private  banker  naturally  felt  that  his 
own  credit  depended  upou  the  solvency  of  his  customers  ;  and 
he  was  obliged,  by  the  very  nature  of  his  business,  to  acquire 
the  most  accurate  knowledge  in  his  power  of  tlie  people  who 
dealt  with  him.  In  precisely  the  same  way  the  London 
banker,  his  correspondent,  looked  carefully  to  the  country 
client's  credit,  and  to  the  charactei"  of  the  bills  which  he  dealt 
in;  while  in  his  own  city  the  Louder  banker  was  subjected 


THK  BANK  OF  ENGLAND  nKSlRICTION.       227 

to  the  scrutiny  of  the  business  community  of  London,  whose 
opinions,  centring  upon  one  point,  guided  the  policy  and  the 
particular  discounts  and  accommodations  of  the  Bank  of  Eng- 
land. Thus  again  the  Bank  was  at  once  the  head  and  heart 
of  English  credit ;  it  exercised  a  controlling  influence  even 
upon  the  remote  provincial  trader. 

So  far  as  the  currency  was  concerned,  the  Bank  could,  by 
contracting  its  issues,  affect  in  a  short  time  tha  whole  circula- 
tion of  England  ;  and  naturally,  when  such  a  contraction  had 
taken  i)lace,  a  renewed  expansion  on  its  part  would  be  likely 
to  result  in  a  similar  movement  on  the  part  of  private  bank- 
ers. But  the  antiquated  and  mischievous  legislation  of  Par- 
liament still  maintained,  and,  in  spite  of  the  severest  practical 
lessons,  long  continued  to  maintain,  a  legal  maximum  of  inter- 
est at  five  per  cent,  even  when  the  government  itself  was 
borrow^ing  at  six.  At  present  the  Bank  regulates  its  discounts 
by  raising  or  lowering  its  rate  according  to  the  value  of  money 
in  the  open  market.  But  while  the  usury  laws  were  in  force, 
the  Bank  continued  to  lend  its  credit  at  five  per  cent,  whether 
the  market  value  was  at  two  or  at  twenty  ;  and  it  possessed 
no  means  of  I'estricting  its  discounts  and  contracting  its  circu- 
lation other  than  that  of  refusing  a  certain  proportion  of  each 
applicant's  paper,  without  regard  to  his  solvency  or  credit. 
Such  a  measure  was  seldom  resorted  to,  since  it  was  calculated 
to  aggi-avate  the  evils  of  a  financial  piessuie,  by  sacrificing  the 
public  in  order  to  save  the  Bank.  In  practice,  therefore,  it 
will  be  seen  that  the  Bank  avoided  the  exercise  of  any  other 
control  over  its  discounts  and  circulation  than  is  implied  by  a 
proper  regard  for  the  soundness  of  the  bills  it  discounted. 
The  directors  might  exercise  more  or  less  of  caution  in  their 
loans,  according  as  hidividual  ci'edit  varied  ;  but  they  never 
during  the  Restriction  attempted  to  act  upon  exchange  or  gen- 
eral credit,  either  by  contracting  or  by  expanding  their  issues. 

The  average  amount  of  Bank  of  England  notes  in  circula- 
tion, during  ten  years  before  the  Restriction,  was  £10,800,000. 
The  best  authorities  estimate  that  the  coin  may  have  then 
amounted  to  about  £20,000,000,  or  somewhat  more.     There 


228  THK   BANK    OF   KNCJLAXD    RKSTRICTION. 

was  also  a  large  quantity  of  country  bank  paper  ;  while  certain 
wealthy  districts,  as  Lancashire,  for  example,  used  no  other 
currency  than  bills  of  exchange,  which  were  passed  from  hand 
to  hand,  and  in  every  case  indorsed  by  the  holdei'.  There  can 
be  no  reasonable  confidence  placed,  therefore,  in  any  estimate 
which  assumes  to  establish  any  fixed  sum  as  representing  the 
value  of  English  currency,  previous  to  the  Restriction.  Per- 
haps £40,000,000  would  be  a  modei'ate  value  to  assign  fin- 
it  ;  and  from  this  calculation  Scotland  and  Ireland  are  ex- 
cluded, since  their  currency  systems  were  independent  of 
England,  and  exercised  no  more  influence  upon  hers  than  those 
of  Holland  or  Hamburg. 

The  great  war,  which  lasted,  with  only  a  few  months'  inter- 
mission, for  upwards  of  twenty  years,  began  in  February, 
1793.  It  was  preceded  and  accompanied  by  a  violent  com- 
mercial crisis  throughout  Europe,  which  caused  in  England  a 
great  number  of  bankniptcies,  and  a  heavy  fall  in  prices,  the 
country  banks  suftering  especially  ;  but  the  Bank  of  England 
succeeded  in  maintaining  its  credit  unimpaired  under  the 
shock ;  and,  in  spite  of  every  difficulty,  continued  its  specie 
payments  and  its  ordinary  discounts,  to  the  immense  relief  of 
the  mercantile  community.  Two  years  of  the  war  passed 
away  without  altering  this  position  of  affairs.  It  was  not  till 
1795  that  a  drain  of  bullion  to  the  Continent  began,  which 
obliged  the  Bank  directors  to  resort  to  the  extraordinary 
measure  of  contracting  their  issues  by  rejecting  a  certain  pro- 
portion of  the  applications  made  upon  them  for  discounts, 
without  regard  to  the  credit  of  the  applicants.  During  the 
next  two  years  the  Bank  circulation  was  steadily  diminished, 
as  the  supply  of  gold  became  smaller  and  smaller.  But  this 
policy  of  contraction  was  seriously  hampered  by  the  necessities 
of  Mr.  Pitt,  then  Prime  Minister,  who  insisted  upon  advances, 
which  the  directors  could  not  honestly  furnish.  The  Bank 
records  are  filled  with  repeated  remonstrances  addressed  to 
Mr.  Pitt  on  this  account,  and  these,  in  February,  179G,  were 
carried  to  the  extent  of  an  absolute  refusal  to  discharge  the 
bills  drawn ;  while  again,  in  July  of  the  same  year,  a  similar 


THE  BANK  OF  ENGLAND  HESTRICTION.       229 

refusal  was  only  overcome  by  the  positive  assurance  of  Mr. 
Pitt  that  it  would  be  impossible  to  avoid  the  most  serious  and 
distressing  embarrassments  to  the  public  service,  unless  an 
advance  to  the  extent  of  £800,000  were  made.  The  Bank 
yielded,  but  only  under  the  strongest  protest,  declaring  that 
nothing  but  the  extreme  pressure  and  exigency  of  the  case 
could  in  any  shape  justify  the  directors  in  acceding.  Whether 
this  source  of  difficulty  was  due  to  bad  management  on  the 
part  of  Mr.  Pitt,  or  whether  he  had  no  choice  but  to  lean  upon 
the  Bank,  is  of  little  consequence.  The  directors,  at  all  events, 
carried  out  their  policy  of  contraction.  While  the  drain  of 
gold  continued,  and  their  treasui*e  fell  from  £  6,000,000  in 
1795  to  £2,000,000  in  August,  1796,  the  circulation  was 
simultaneously  reduced  from  £14,000,000  to  £9,000,000. 
But  violent  as  this  contraction  was,  it  failed  to  counteract  the 
causes  of  the  drain.  Foi'eign  subsidies,  the  payment  for  large 
quantities  of  imported  grain,  and  of  articles  the  price  of  which 
had  been  enormously  increased  by  the  war  demand,  prevented 
the  exchange  from  rising.  It  is  estimated  that  for  three  years, 
from  1794  to  1796,  these  extraordinary  payments  amounted 
to  £40,000,000,  — a  calculation  which  is  certainly  not  extrav- 
agant, if  compared  with  the  length  of  time  and  the  amount 
of  pressure  required  to  restore  the  exchanges. 

It  is  difficult  to  say  what  more  coiild  have  been  done  by  the 
Bank  in  order  to  preserve  the  country  from  the  evils  of  an 
inconvertible  currency.  The  directors  might  have  refused 
to  advance  another  shilling  in  loans,  and,  in  order  to  save 
themselves,  might  have  forced  a  national  bankruptcy,  as  well 
as  general  private  ruin ;  but  they  could  scarcely  have  reduced 
their  issues  more  resolutely  than  they  did,  or  resisted  more 
obstinately  the  entreaties  of  the  merchants.  These  last  were 
mercilessly  sacrificed ;  and  their  fate  was  especially  hard, 
since  the  crisis  appears  to  have  been  caused  by  no  act  of 
theirs,  but  solely  by  a  combination  of  political  and  natural 
agencies,  by  bad  harvests  and  foreign  ware,  over  which  they 
could  have  exercised  no  control,  and  on  the  occurrence  or  the 
cessation  of  which  they  could  not  have  calculated. 


230  THK   BANK   OF   ENGLAND   RESTRICTION. 

The  measures  thus  taken  by  the  Bank  were  in  fact  success- 
ful. Early  in  1797,  the  tide  had  already  turned;  the  foreign 
exchanges  began  to  improve  ;  and  there  can  be  no  doubt  that, 
had  the  Bank  been  able  to  stand  another  month  or  two  of 
pressure,  gold  would  have  flowed  plentifully  into  its  coffers. 
But  precisely  at  the  time  of  extreme  exhaustion,  after  the  for- 
eign drain  had  been  checked,  but  when  the  Bank  was  too  weak 
for  further  resistance,  a  sudden  panic  seized  the  people  of 
England.  An  ungrounded  alarm  of  French  invasion  caused  a 
run  upon  the  banks  of  Newcastle,  and  obliged  them  to  sus- 
pend payment.  From  Newcastle,  the  panic  spread  iu  all 
directions.  Every  country  banker  rushed  to  the  Bank  of 
England  for  assistance  or  for  gold.  The  Bank  responded  by 
forcing  its  issues  down  to  £8,040,000,  while  its  treasures  fell 
to  £1,200,000,  and  the  panic  naturally  gi-ew  more  and  more 
violent.  Hopeless  of  averting  their  fate,  the  directors  at  last 
sent  word  to  Mr.  Pitt  that  surpension  was  inevitable ;  and  on 
the  moniing  of  Monday,  the  27th  of  February,  an  Order  in 
Council,  issued  the  preceding  day,  was  posted  ou  the  doors  of 
the  Bank,  forbidding  further  payments  in  cash. 

The  ])olicy  of  the  Bank  throughout  this  crisis  has  been 
since  that  day  very  generally  criticised  ;  and  tlie  directors 
themselves  afterwards  expressed  it  as  their  opinion  that  the 
contraction  had  been  pressed  too  far,  until  it  contributed  to 
bring  about  the  very  difficidty  it  was  intended  to  preclude.  It 
is  contended  that  a  bolder  policy  should  have  been  adopted, 
and  that  the  discounts  should  have  been  liberally  increased, 
while  Ihe  gold  should  have  been  i)aid  out  down  to  the  hist 
guinea.  In  support  of  this  theory  is  instanced  the  celebrated 
crisis  of  1825,  when  the  Bank,  in  face  of  a  dmin  whiclj  re- 
duced its  stock  of  gold  to  £1,027,000,  increased  its  issues 
from  £  17,000,000  to  25,000,000,  and  succeeded  in  restoring 
confidence  and  maintaining  its  paynjents.  However  this  may 
be,  it  is  at  least  a  matter  of  regret  that  Mr.  Pitt  should  have 
Banctioiied  suspension  before  exhausting  every  possible  alter- 
native. At  the  worst,  the  Bank  could  only  have  refused  to 
redeem   its  notes.     While  there  wcs  a  single  chance  left  of 


THE  BANK  OF  ENGLAND  KESTRICTION.      231 

escaping  this  final  disaster,  neither  Mr.  Pitt  nor  the  Bank 
directors  were  justified  in  neglecting  it.  The  mere  political 
consequences  of  suspension,  in  that  disastrous  year,  were  a 
triumph  to  the  enemy  as  important  as  the  mutiny  at  the  Nore 
or  the  Treaty  of  Leoben. 

Mr.  Pitt,  however,  felt  the  necessity  of  maintaining  the 
credit  of  the  Bank ;  and  he  appears  to  have  thought  that  this 
might  be  done  by  giving  to  the  suspension  an  official  appear- 
ance, and  throwing  upon  it  the  character  of  a  compulsory  act 
of  government.  He  represented  tlie  Bank  as  a  passive,  or 
even  unwilling,  instrument,  in  the  hands  of  the  Privy  Cotmcil. 
The  expedient  was  shallow,  and  unwoi*thy  of  so  great  a  man ; 
nor  was  it  likely  to  deceive  any  person,  however  dull  of  com- 
prehension he  might  be.  But  its  result  was  fortunate;  for 
while  Mr.  Pitt  declared  that  the  affairs  of  the  Bank  were  in 
the  most  affluent  and  flourishing  condition,  and  that  the 
restriction  was  only  a  precautionary  government  measure, 
which  in  a  few  weeks  would  be  removed,  he  established,  un- 
consciously as  we  must  believe,  a  legal  fiction  of  some  value. 
Parliament  never  recognized  any  incapacity  on  the  part  of  the 
Bank  to  meet  its  obligations,  but  only  a  temporary  restriction, 
created  by  itself,  and  limited  by  law  to  a  certain  period. 
There  was  at  least  a  delicate  distinction  favorable  to  national 
pride  and  private  credit  involved  in  this  idea  that  there  was 
no  actual  bankruptcy  in  the  case,  but  that  the  government 
had  seen  fit,  for  the  public  convenience,  to  relieve  the  Bank 
for  a  time  from  a  duty  which  it  was  still  ready  and  able  to 
perform. 

It  was  not  unnatural,  indeed,  that  Mr.  Pitt  should  make  use 
of  this  or  any  other  deception  in  order  to  quiet  the  geiieral 
alarm.  The  idea  of  inconvertible  currency  was,  in  1797, 
exclusively  associated  with  the  Continental  paper  of  the 
American  Congress,  and  with  the  assignats  of  the  French 
Directory.  It  was  supposed  by  men  like  Fox  and  Lord  Lans- 
downe  that  the  mere  fact  of  inconvertibility  must  soon  de- 
stroy that  confidence  in  paper  which  enabled  it  to  represent 
values.     A  few  months,  it  was  believed,  would  bring  about 


232  THE   BANK    OF   ENGLAND   HESTllICTION. 

this  decay  of  credit.  To  provide  against  such  a  disaster, 
extraordinary  efforts  were  required.  On  the  very  day  of  sus- 
pension, a  great  meeting  was  held  at  the  Mansion  House,  the 
Lord  Mayor  presiding ;  and  more  than  three  thousand  busiuess 
men  pledged  themselves,  by  resolution,  to  receive  and  to  make 
their  payments  in  bank-notes,  as  equivalent  to  coin.  A  nearly 
similar  paper  was  signed  and  published  by  the  Lords  of  the 
Council.  At  the  present  time,  such  a  pledge  would,  in  similar 
circumstances,  be  considered  as  quite  sviperfluous ;  but  in  that 
day  it  had  a  value,  and  tended  to  restore  public  confidence. 
Had  the  foreign  drain  still  continued,  bank-paper  would,  no 
doubt,  have  rapidly  fallen  to  a  discount,  in  spite  of  all  the 
resolutions  that  could  have  been  passed  ;  but  we  have  already 
seen  that  this  cause  of  difficulty  had  ceased  to  act.  The  only 
effect  of  suspension  was  to  lower  the  exchanges  for  a  very  few 
days,  after  which  they  again  rallied,  and  before  the  close  of 
the  year  they  had  risen  to  the  highest  point  ever  known.  The 
Bank  at  once  inci'eased  its  issues,  and  commerce  returned  to 
its  regular  routine. 

The  suspension  having  once  taken  place,  it  became  neces- 
sary for  Parliament  to  intervene,  not  merely  to  legalize  the 
act,  but  to  establish  a  status  for  the  new  condition  of  the  Bank. 
A  secret  committee  was  appointed,  which  made  elaborate  hi- 
vestigations,  and  concluded  by  reporting  a  bill,  indemnifying 
the  governor  and  directors  for  all  acts  done  in  pursuance  of  the 
Order  in  Council ;  superseding  all  actions  which  might  have 
been  brought  against  them  for  refusing  payments  ;  prohibiting 
them  from  issuing  cash,  except  in  sums  under  twenty  shillings ; 
sheltering  them  from  prosecutions  for  withholding  payment 
of  notes,  for  which  they  were  willing  to  offer  other  notes  iu  ' 
exchange  ;  restricting  them  from  advancing  to  the  Treasury 
any  sum  exceeding  £  GOO, 000  ;  obliging  the  collectors  of  reve- 
nue to  receive  bank-notes  in  payment ;  protecting  the  subject 
from  arrest  for  debt,  unless  the  affidavit  to  hold  him  to  bail 
contained  a  statement  that  the  amomit  of  debt  claimed  had 
not  been  tendered  in  money  or  bank-notes  ;  and  limiting  the 
duration  of  the  restriction  to  the  24th  of  June  following. 


THK  BANK  OF  KNGLAXI)  RESTRICTION.       233 

It  is  interesting  to  obsei've  how  cautiously  the  govern- 
ment acted.  The  poUcy  of  Mr.  Pitt  may  not  have  been  bold, 
nor  necessarily  correct ;  but  it  was  at  least  free  from  the  grie- 
vous mistakes  which  have  ruined  or  dishonored  almost  every 
country  where  an  inconvertible  currency  has  existed.  He 
began  by  treating  the  suspension  as  a  temporary  difficulty, 
and  carefully  limiting  its  duration.  In  this  respect,  his  suc- 
cessors invariably  followed  his  example  ;  and  never,  during  the 
next  twenty-three  years,  w^as  there  a  time  when  Parliament 
allowed  the  country  to  consider  the  restriction  as  other  than  a 
temporary  measure,  for  the  termination  of  which  a  provision 
was  made  by  law.  He  further  pledged  the  government  not  to 
make  an  improper  use  of  the  Bank  resources,  nor  to  tamper 
with  the  currency  by  obtaining  excessive  advances,  and  this 
pledge  he  honestly  observed.  Finally,  he  refused  to  make  the 
bank-note  a  legal  tender,  except  as  between  the  government 
and  the  public,  still  allowing  the  creditor  to  insist  upon  pay- 
ment in  coin,  if  he  chose  to  do  so ;  and  leaving  open  to  him 
his  ordinary  process  in  law,  except  only  the  power  of  arrest  in 
the  first  instance.  England  probably  owes  more  than  she  is 
aware  of  to  Mr.  Pitt  for  his  forbearance  in  regard  to  the  cur- 
rency. His  necessities  were  great,  and  his  power  was  un- 
limited. He  might  have  used  paper  money  as  was  done  by 
contemporary  financiers ;  but  the  example  which  he  set  be- 
came a  law  for  his  successors,  so  that  whatever  mistakes  he 
or  his  imitators  may  have  made,  they  arc  not  chargeable  with 
that  of  tampering  with  the  currency. 

The  Restriction  Act  passed  without  opposition,  and  in  June 
was  contiimed  till  one  month  after  the  commencement  of  the 
)ioxt  session.  In  the  mean  time,  gold  began  again  to  flow  into 
the  Bank,  which  held  in  August  treasure  to  the  amount  of 
£4,000,000,  against  a  circulation  of  £11,000,000.  When 
Parliament  again  met  in  the  autumn,  the  Bank  directors 
announced  themselves  ready  to  resume  payments,  "if  the 
political  circumstances  of  the  country  do  not  render  it  in- 
expedient." 

Had  Mr.  Pitt  been  able  to  foresee  tlie  course  which  events 


234  THE   BANK   OF   ENGLAND   RESTRICTION. 

would  take  during  the  next  ten  years,  he  would  surely  have 
acted  at  once  upon  this  opportunity.  The  dangers  and  temp- 
tations of  irredeemable  paper  were  too  obvious  for  any  states- 
man to  incur  them,  unless  under  an  absolute  necessity.  But 
Mr.  Pitt  probably  foresaw  something  very  different  from  what 
actually  occurred.  He  had  every  reason  to  expect  a  series  of 
monetary  convulsions  and  commercial  misfortunes,  such  as  had 
harassed  him  since  1 792.  On  the  other  hand,  he  saw  that 
none  of  the  prophesied  evils  had  really  followed  restriction. 
It  had  been  proved  that  bank-paper  did  not  depend  for  its 
credit  merely  on  its  convertibility.  !Month  after  month  had 
passed  away,  not  only  without  bringing  depreciation,  but  even 
i-apidly  increasing  the  stream  of  precious  metals  which  flowed 
towards  England,  so  that  people  were  little  inclined  to  dwell 
upon  the  dangers  or  temptations  of  restriction,  and  probably 
overestimated  its  value  as  a  safeguard  against  panic.  They 
were  already  demoralized.  Mr.  Pitt  was  not  ashamed  to  fall 
back  upon  the  hint  given  by  the  Bank  directors,  and  to  de- 
clare "  that  the  avowal  by  the  enemy  of  his  intention  to  ruin 
our  public  credit  was  the  motive  for  an  additional  term  of  re- 
striction "  ;  —  thus,  as  Mr.  Tierney  rejoined,  in  order  to  leave 
the  enemy  no  credit  to  attack,  destroying  it  himself;  for  it  is 
difficult  to  see  how  France  was  prevented  by  the  Restriction 
from  any  action  upon  public  credit,  except  precisely  that  of 
causing  another  restriction. 

The  bill,  however,  by  which  the  measure  was  continued  till 
one  month  after  the  conclusion  of  peace,  passed  with  little 
opposition,  Mr.  Fox  and  his  friends  having  ceased  to  take 
part  in  the  debates.  Had  the  Bank  been  now  obliged  to  re- 
sJime  its  cash  payments,  it  would  have  had  no  great  difficulty 
in  maintaining  them  till  1808  or  1809,  when  it  must  inevita- 
bly, from  mere  political  causes,  have  jvgain  broken  down.  But 
the  occasion  was  lost,  and  from  this  time  the  Restriction  took 
its  place  among  the  permanent  war-measures  of  the  govern- 
ment. 

Previous  to  the  suspension,  no  bank-note  of  less  than  five 
pounds  in  value  was  allowed  to  circulate.    Under  the  new  state 


THE   BANK   OF   ENGLAND    RESTRICTION.  235 

of  affairs  this  prohibition  was  removed,  and  notes  of  one  and 
two  pounds  began  rapidly  to  drive  gold  from  ordinary  use. 
With  this  exception,  the  public  appears  to  have  been  quite  un- 
affected by  the  change  in  the  currency.  Throughout  the  year 
1798  the  Bank  continued  to  receive  treasiire,  and  the  foreign 
exclianges  continued  favorable,  until  at  the  end  of  February, 
1799,  there  was  an  accumulation  of  more  than  £7,500,000  in 
the  Bank  vaults,  against  a  circulation  in  notes  of  less  than 
£13,000,000.  Apparently  nothing  could  be  more  solid  than 
such  a  position.  No  expansion  of  consequence  oocun'ed  in  the 
Bank  circulation  ;  and  yet,  by  the  close  of  1799,  the  exchanges 
had  turned  against  England,  and  the  gold  began  to  disappear 
as  rapidly,  or  almost  as  rapidly,  as  it  had  accumulated.  The 
explanation  of  this  sudden  revolution  was  simple.  A  deficient 
harvest  had  caused  large  importations  of  corn  ;  a  severe  com- 
mercial crisis  at  Hamburg  had  produced  a  considerable  press- 
ure for  the  immediate  transmission  of  funds  from  England ; 
and  the  "war  on  the  Continent  created  a  perpetual  demand  for 
gold  to  supply  the  annies.  Had  the  Bank  now  been  obliged 
to  redeem  its  notes,  it  might  probably  have  contracted  its 
issues.  Instead  of  doing  so,  it  extended  them  in  proportion 
to  the  increased  demand  for  discounts  thrown  upon  it  by  the 
rise  in  the  market  rate  of  interest,  and  the  circulation  rose  till 
in  the  first  quarter  of  1801  it  averaged  nearly  £16,500,000. 
Tlie  price  of  gold  also  rose,  until  it  stood  at  a  premium  of  ten 
per  cent. 

These  events  naturally  caused  uneasiness ;  they  gave  rise, 
in  fact,  to  the  first  currency  controversy.  Mr.  Boyd,  a  mem- 
ber of  Parliament,  published  a  pamphlet  with  the  object  of 
proving  that  the  depreciation  was  due  to  the  excess  of  bank- 
notes. He  was  answered  by  Sir  Francis  Baring  and  Mr. 
Henry  Thornton,  whose  work  remains  to  this  day  a  standard 
authority.  As  the  question  then  raised  was  practically  identi- 
cal with  that  which  ten  j'ears  afterwards  excited  the  most 
elaborate  and  earnest  discussion,  we  shall  not  now  stop  to  ex- 
amine into  it.  Events  soon  decided  in  favor  of  Mr.  Boyd's 
opponents.     The  Bank  continued  its  policy  undisturbed  ;  the 


236  THE   BANK   OF   ENGLAND   RESTRICTION. 

pressure  ceased  ;  during  1801  and  1802  the  foreign  exchanges 
again  rose,  and  gold  fell  almost  to  par.  It  seems  to  be  beyond 
dispute  that  the  temporary  depreciation  of  1801  was  preceded 
by  the  fall  of  exchange,  and  was  caused  by  it ;  and  that,  when 
the  accidental  foreign  demand  for  gold  had  been  satisfied,  the 
currency  returned  to  its  natural  value,  without  any  effort  on 
the  part  of  the  Bank,  or  any  artificial  pressure  on  credit  or  on 
the  circulation. 

Without  admitting  this  to  be  the  case,  it  appears  scarcely 
possible  to  explain  the  course  which  events  afterwards  took, 
and  the  perfect  stability  of  the  currency  during  a  number  of 
years  when  the  circulation  was  still  further  enlarged.  The 
Treaty  of  Amiens  was  signed  in  March,  1802  ;  and  the  inter- 
val of  peace,  short  as  it  was,  allowed  Great  Britain  a  momentary 
relief  of  inestimable  value.  But  the  Restriction  Act  was  again 
continued  for  another  term,  and  the  Bank  circulation  rose  to 
nearly  £  17,400,000,  without  producing  any  sensible  effect  on 
exchange  or  on  the  price  of  gold.  War  was  resumed  in  May, 
1803,  but  without  affecting  the  value  of  the  currency,  which 
during  the  next  five  years  remained  stationary  in  its  amount, 
or  only  varied  slightly  between  £  16,000,000  and  £  17,000,000. 
The  Bank,  meanwhile,  anxious  to  maintain  its  reserve  of  bul- 
lion, offered  a  standing  premium  of  about  three  i)cr  cent  for 
gold,  and  hence  it  has  been  usually  supposed  that  the  bank- 
notes wex'C  actually  depreciated  to  this  extent.  This,  however, . 
was  not  the  case.  Under  such  circumstances  the  exchanges 
become  the  only  true  standard,  and  in  those  days  the  quota- 
tions of  exchange  included  any  existing  depreciation  of  paper  ; 
the  nominal,  not  the  real,  exchange  was  always  given,  so  that, 
in  the  want  of  any  fair  quotations  of  gold,  wo  can  only  esti- 
mate its  fluctuations  in  vahic  by  means  of  the  recorded  fluctu- 
ations in  exchange.  It  ajjpcars  that  these  were  very  slight, 
and  rather  in  favor  of  Enghmd  than  against  her,  so  that  the 
Bank  had  actually  accumulated  in  1805  the  very  unusual  sum 
of  £  7,600,000,  —  a  result  which  indicates  that  the  bank-notes 
with  which  this  treasure  was  bought  could  not  have  been  de- 
preciated to  the  full  extent  of  the  three-pcr-cent  bonus  oft'ered 


THE   BANK   OF   ENGLAND   RESTRICTION.  237 

as  an  inducement  to  the  seller.  During  the  whole  of  this 
period  from  1803  to  1808,  Bank  paper  was  in  fact  at  par,  or 
not  enough  below  it  to  have  made  the  exportation  of  gold 
pi'ofitable  in  a  time  of  specie  payments.  There  wei-e  no  doubt 
intervals  when  the  Bank  lost  gold,  but,  if  the  average  of  each 
year  be  taken,  it  will  be  found  that  the  exchanges  were  uni- 
formly favorable. 

No  comparison  can  be  just  which  is  drawn  between  such  a 
state  of  things  as  this  and  the  ordinary  forced  issues  of  gov- 
ernment paper,  such  as  have  been  known  in  most  coimtries 
suffering  under  prolonged  difficulties.  There  is  a  distinct  dif- 
ference between  the  two  cases,  and  we  art  obliged  to  dwell 
with  emphasis  upon  this  difference,  because  we  believe  that  it 
entirely  removes  the  English  currency  from  th(j  same  class  with 
ordinary  instances  of  depreciation.  Usually  the  issue  of  paper 
has  been  assumed  by  governments  themselves,  and  such  issues 
have  been  made  directly  in  payment  of  expenses,  without  pi*o- 
viding  on  the  same  scale  for  a  return  of  the  paper  put  out,  or 
consulting  in  any  way  the  wants  of  the  people.  Bank  of  Eng- 
land paper  was  in  no  sense  a  government  issue.  It  was  not 
even  government  paper,  but  merely  that  of  a  private  banking 
corporation,  which  was  conducted  on  very  strict  banking  prin- 
ciples, and  whose  notes,  so.  far  as  they  were  in  excess  of  public 
wants,  were  inevitably  returned  at  once  to  the  bank  counters. 
The  government,  therefore,  was  not  to  blame  if  paper  was  is- 
sued in  excess  ;  but  in  such  a  case  it  must  have  been  the  Bank 
directors  who  failed  to  observe  proper  rules  in  their  extensions 
of  credit  either  to  the  government  or  to  individuals. 

It  is  necessary,  therefore,  to  turn  aside  for  a  moment  in  or- 
der to  examine  the  Bank  rules  of  that  day  in  regard  to  their 
ordinary  action  upon  the  circulation,  since  it  is  here  that  the 
secret  will  be  found,  not  only  of  the  steadiness  of  value  which 
marked  the  currency  during  the  first  ten  yejirs  of  war,  but 
of  its  extraordinary  fluctuations  afterwards,  —  fluctuations 
which  are  quite  inexplicable  on  the  ordinary  supposition  of  a 
forced  issue.  It  must  be  remembered  that  the  usury  laws 
fixed  the  highest  legal  rate  of  interest  at  five  per  cent.     The 


238       THE  BANK  OF  ENGLAND  RESTRICTION. 

Bank  rule,  during  the  whole  period  of  Restriction,  was  to  dis- 
count at  this  rate  all  good  mercantile  bills  oftered,  not  having 
more  than  sixty-one  days  to  run  ;  and  in  making  these  ad- 
vances the  only  duty  which  the  directors  considered  themselves 
obliged  to  observe  was  that  of  throwing  out,  so  far  as  possible, 
all  bills  which  there  was  reason  to  believe  represented  specu- 
lative transactions.  In  other  respects  the  Bank  was  perfectly 
passive.  It  neither  contracted  nor  expanded  its  own  issues, 
but  allowed  the  public  demand  to  contract  or  expand  the  cur- 
rency, in  the  firm  conviction  that  the  public  would  not  retain 
more  notes  than  it  actually  required.  Naturally  the  demand 
for  discount  at  the  Bank  varied  according  to  the  market  rate 
of  interest  outside ;  and  when  private  bankers  lent  money  at 
three  per  cent,  comparatively  few  persons  cared  to  pay  five  to 
the  Bank  of  England.  During  the  early  part  of  the  war  the 
Bank  rate  was  in  fact  almost  always  higher  than  that  in  the 
open  market,  and  consequently  the  Bank  issues  were  moderate. 
By  a  regularly  self-balancing  principle,  the  advances  made  to 
goveriunent  in  an  oi'diuary  state  of  affiiirs  diminished  the  pri- 
vate demand,  since  the  government  at  once  paid  away  to  the 
public  the  notes  it  received  from  the  Bank,  and  this  money, 
coming  back  to  the  private  bankers,  enabled  them  to  extend 
their  discounts  and  to  accommodate  those  merchants  who 
would  otherwise  have  been  obliged  to  apply  to  the  Bank.  It 
is  merely  a  theoretical  question,  what  would  have  been  the 
result  had  government  obliged  the  Bank  to  make  excessive  jui- 
vances  on  its  account.  In  point  of  fact,  the  case  did  not 
occur,  and  government  contented  itself  with  moderate  accom- 
modation ;  while,  as  a  rule,  the  private  demands  were  greatest 
when  the  advances  to  government  were  at  the  lowest  point. 

Thus  the  Bank  was  throughout  a  mere  channel  of  credit. 
It  did  not,  and  under  these  rules  it  could  not,  exercise  any 
direct  control  over  its  issues,  and  it  conducted  its  business  upon 
much  the  same  principles  as  would  have  regulated  any  sound 
private  banker,  wlietlier  he  issued  notes  or  not.  Its  theory 
excluded  the  idea  that  it  was  bound  to  regard  the  exchanges 
or  thp  price  of  gold,  or  to  interfere  in  any  way  with  the  course 


THE   BANK   OF   ENGI^AND   RESTRICTION.  239 

of  business.  Its  sole  duty  was  to  lend  capital,  and  it  was  for 
the  public  and  for  each  individual  merchant  to  see  that  his 
affairs  were  in  a  proper  condition,  that  speculation  was  avoided, 
that  the  exchanges  were  watched,  or  to  take  the  consequences 
of  neglecting  such  obvious  precautions. 

And  so  long  as  each  individual  did  observe  a  proper  degree 
of  precaution,  or  until  political  difficulties  or  some  other  acci- 
dental cause  deranged  the  ordinary  state  of  credit,  these  rules 
of  the  Bank  answered  the  purpose  for  which  they  were  made. 
But  while  the  usury  laws  remained  in  force,  any  rise  in  the 
market  rate  of  interest  was  certain  to  precipitate  the  whole 
body  of  merchants  upon  the  Bank  of  England,  and  any  crisis 
which  obliged  private  bankers  to  seek,  instead  of  furnishing 
credit,  was  sure  to  bring  the  whole  nation  to  the  counters  of 
the  Bank.  In  either  of  these  cases,  therefore,  the  Bank  was 
liable  to  be  driven  into  an  excessive  issue  of  its  paper,  and 
extension  of  its  credit.  But  it  did  not  necessarily  follow  that 
such  an  expansion  would  lead  to  a  permanent  increase  of  the 
circulation.  On  the  contrary,  whenever  the  crisis  was  over, 
and  the  rate  of  interest  again  had  fallen  below  the  Bank  stand- 
ard, the  demand  for  discoimt  would  naturally  decline,  and  the 
circulation  would  return  to  its  normal  state. 

For  two  or  three  years  after  the  war  had  been  resumed, 
everything  went  on  in  a  sound  and  regular  course.  Great 
Britain  might  have  caiTied  on  hostilities  indefinitely,  had  she 
been  subjected  to  no  greater  pressure.  The  currency  retained 
its  value,  and  trade  its  I'egularity,  but  taxation  was  greatly 
augmented  and  the  cost  of  production  increased.  Prices 
steadily  rose,  luitil  they  attained  in  1805  almost  as  high  a 
range  as  ever  afterwards.  With  the  exception  of  grain,  an 
article  peculiarly  liable  to  be  affected  by  accidental  causes,  it 
appears  that  almost  the  whole  rise  in  prices,  which  was  after- 
wards attributed  to  depreciation  of  ciirrency,  took  place  dur- 
ing the  first  twelve  or  fifteen  years  of  the  wax*,  when  no 
depreciation  existed.  Much  of  it  occurred  at  a  time  when 
paper  was  highest  in  credit,  and  there  is  no  reason  for  suppos- 
ing that  the  same  thing  would  not  have  equally  happened, 
even  if  the  Bank  had  continued  its  specie  payments. 


240  THE   BANK   OF   ENGLAND   RESTRICTION. 

This  comparatively  happy  and  prosperous  state  of  affairs 
was  not  destined  to  continue.  While  the  English  were  waging 
a  cheap  and  effective  war  on  the  ocean  and  in  the  colonies, 
while  Nelson  crushed  the  combined  navies  of  France  and  Spain 
at  Trafalgar,  and  Wellington  subdued  the  Mahrattas  in  India, 
Napoleon  reached  Vienna,  and,  turning  from  Austerlitz  to  Bei"- 
lin,  swept  the  whole  of  Germany  into  the  hands  of  France. 
From  Berlin  he  turned  to  Russia,  and  at  Friedland  stopped 
for  the  mere  want  of  other  coiuitries  to  conquer. 

Such  successes  promised  little  good  to  England.  Napoleon 
hastened  to  turn  his  new  power  against  her.  It  was  from  Ber- 
lin, in  November,  1806,  that  he  issued  the  famous  decree  de- 
claring the  British  Islands  in  a  state  of  blockade,  confiscating 
English  property  wherever  found,  and  prohibiting  all  inter, 
course  with  the  British  nation.  Russia  joined  the  coalition  in 
the  following  year,  and  Sweden  in  1809.  Thus  the  Continent 
Avas  closed  to  English  commerce. 

Napoleon's  decree  was  an  outrage  to  international  law,  but 
the  Continental  System  thus  enforced  was  a  prodigious  shock 
to  Great  Britain.  There  seemed  no  end  to  the  losses  and 
complications  which  it  caused.  Yet  there  was  still  one  coun- 
try apparently  beyond  its  reach,  whose  commerce  was  of  ines- 
timable importance.  The  United  States  of  America  was  still 
an  open  market,  and  the  Berlin  Decree  almost  inevitably  forced 
the  United  States  into  the  arms  of  England.  The  British  gov- 
enmicnt,  however,  with  characteristic  fatuity,  actually  assisteil 
Napoleon  to  extend  the  Continental  System  even  to  America. 
The  Berlin  Decree,  and  that  of  Milan  which  followed  it,  had 
declared  the  British  Islands  to  bo  in  a  state  of  blockade,  and 
ordered  that  no  ship  should  enter  any  port  imder  the  con- 
trol of  France,  if  she  came  from  England,  or  even  had  touched 
at  England,  or  if  any  part  of  her  cargo  was  English.  The 
British  government  retaliated  in  Januarj',  1807,  by  issuing  an 
Onler  in  Council  interdicting  the  passage  of  vessels  between 
any  two  porta  which  were  not  open  to  British  commerce ;  and 
in  November  followed  this  up  by  declaring  all  ports  closed  to 
the  British  flag  to  be  in  a  state  of  blockade,  and  all  vessels 


THE    BANK    OF    ENGLAND    l.'ESTEICTION.  241 

trading  to  or  from  such  ports,  or  carrying  any  pi'oduce  of  such 
countries,  to  be,  with  their  cargoes,  lawful  prize.  The  Ameri- 
can government  responded  to  these  outrages  by  interdicting 
commerce  with  both  England  and  France. 

No  ordinary  review  can  undertake  so  difficult  and  compli- 
cated a  labor  as  that  of  fairly  examining  the  various  efiects  of 
these  measures  on  English  credit  and  currency.  That  British 
trade  with  the  Continent  was  annihilated,  that  it  was  for  a 
time  impossible  to  determine  the  course  of  exchange,  and  to 
recover  debts,  was  but  the  most  obvious  and  immediate  result. 
No  sooner  did  it  l)ecome  evident  that  the  deci*ees  were  to  be 
rigorously  enforced,  than  all  articles  for  a  supply  of  which 
England  depended  on  the  Continent  rose  to  speculative  prices. 
Flax,  linseed,  tallow,  timber,  Spanish  wool,  silk,  hemp,  even 
American  cotton,  advanced  in  1807  and  1808  to  prices  two  or 
three  times  those  hithei'to  prevailing.  And  while  one  class 
of  imports  was  thus  thrown  wholly  into  the  hands  of  specu- 
lative holders,  another  class,  consisting  of  all  colonial  produce, 
underwent  an  exactly  opposite  process.  The  European  market 
was  closed  to  it.  Sugar  and  coffee  were  selling  at  Calais  for 
three,  four,  and  five  times  their  price  at  Dover.  And  mean- 
while the  almost  omnipotent  naval  force  of  Great  Britain  was 
contributing,  under  the  Orders  in  Council,  to  aggravate  this 
evil,  and  to  pile  up  still  vaster  quantities  of  unsalable  goods  in 
British  warehouses,  by  compelling  eveiy  neutral  ship  to  make 
for  an  English  port. 

A  wild  spirit  of  speculation  now  took  possession  of  the  Brit- 
ish people.  Brazil  and  the  South  American  colonies  of  Spain 
happened  at  this  moment  to  offer  a  new  market,  and  merchants 
flung  themselves  upon  it  as  though  it  had  no  limit.  The  beach 
at  Rio  Janeiro  was  for  a  time  covered  with  English  merchan- 
dise, which  there  were  no  warehouses  to  hold,  and  which  there 
was  no  chance  of  selling.  In  London,  a  rage  for  visionary 
joint-stock  enterprises  characterized  the  years  1807  and  1808. 
None  of  the  symptoms  were  wanting  which  long  experience 
has  shown  to  be  invariable  precursors  of  commercial  disaster. 

The  Bank  of  England,  however,  still  preserved  its  steady 
11  p 


242  THK   BANK    0F    ENGLAND    KKSTRICTION. 

and  conservative  routine.  The  issues  were  not  increased,  the 
price  of  gold  did  not  vary,  the  exchanges  had  not  fallen  below 
par,  as  late  as  September,  1808.  So  far  as  the  Bank  is  con- 
cerned, there  is  no  indication  that  any  unusual  speculation 
existed,  or  that  it  lent  itself  or  was  asked  to  lend  itself  to 
speculative  objects.  It  was  not  through  the  Bank  that  specu- 
lators acted.  But  if  we  turn  to  the  private  and  country  bank- 
ers, and,  out  of  the  almost  impeneti*able  obscurity  in  which 
this  part  of  the  subject  is  hidden,  attempt  to  gather  some  evi- 
dence of  their  condition,  it  will  be  found,  niit  indeed  that  their 
paper  was  depreciated,  — for  that  it  could  not  be  without  im- 
mediately bankrupting  the  issuer,  —  but  that  their  credit  had 
been  extended  far  beyond  any  moderate  limit.  It  was  not 
merely  that  the  nimilier  of  country  banks  had  been  more  than 
doubled  in  ten  years.  What  was  of  greater  consequence  than 
this  was  the  change  which  had  gradually  crept  into  their  mode 
of  conducting  business.  Originally  their  rules  of  discount  had 
been  the  same  as  those  of  the  Bank  of  England  ;  they  accepted 
only  short  bills,  I'epresenting,  so  far  as  they  could  judge,  real 
transactions  of  business.  They  gi'adually  began  to  make  ad- 
vances upon  bills  of  longer  date,  and  then  to  lend  money 
without  security  of  any  kind.  Paper  which  could  not  be  dis- 
counted in  London  was  sent  down  to  them  b^  their  London 
agents.  Their  West  Indian  bills  had  from  twelve  to  thirty- 
six  months  to  run.  They  made  little  inquiry  as  to  what  might 
be  accommodation  paper,  and  still  less  as  to  the  speculative 
transactions  of  their  customers.  The  reaction  which  idti- 
mately  followed,  at  the  very  time  when  the  Bank  circulation 
was  greatly  increased  and  increasing,  proves  the  extent  to 
which  private  credit  had  been  abused. 

We  have  been  led  into  this  somewhat  tedious  account  of 
England's  financial  situation  in  1807  and  1808,  by  the  hope 
of  showing  how  critical  her  position  was,  and  how  inevitable  a 
collapse  of  credit  had  become.  Down  to  this  point,  however, 
the  subject  offers  comparatively  few  difficulties.  Beyond  it, 
the  whole  region  has  been  made  a  favorite  battle-ground  for 
armies  of  currency  theorists.     It  is  only  within  the  last  thii'ty 


THE  BANK   OF   ENGLAND   RESTRICTION.  243 

years  that  even  a  fair  comprehension  of  the  matters  in  dispute 
has  been  made  possible  to  the  public,  through  the  great  work 
of  Mr.  Thomas  Tooke.  The  opinions  first  advocated,  and  the 
facts  first  proved  by  the  author  of  the  "  History  of  Prices," 
have  since  been  accepted  by  some  of  the  highest  authorities  in 
pohtical  economy,  of  whom  Mi*.  John  Stuart  Mill  stands  at  the 
head.  That  they  are  still  hotly  contested  in  England  is  a  fact 
which  only  adds  to  the  interest  of  the  inquiry. 

It  has  already  been  stated,  that  down  to  September,  1808, 
the  exchanges  remained  favorable  to  England,  and  the  price 
of  gold  continued  firm.  During  the  first  half-year,  the  average 
Bank  circulation  had  been  £16,950,000.  At  the  end  of  Au- 
gust, £17,200,000  were  in  issue.  These  sums  were  not  ex- 
cessive. If  the  small  notes,  which  merely  supplied  the  place 
of  coin  withdrawn,  are  deducted,  it  appears  that  the  real  cir- 
culation was  but  £12,993,000  ;  less  than  had  frequently  been 
in  issue  before,  and  considerably  less  than  has  always  been  in 
issue  since.  The  prices  of  all  commodities,  except  grain,  had 
already  reached  their  highest  point,  or  reached  it  within  six 
months  afterwards.  It  was  at  this  time,  when  no  change  ex- 
cept ordinary  fluctuations  had  occurred  in  the  currency  for 
seven  years,  that  the  exchanges  suddenly  turned,  and  the  price 
of  gold  rose.* 

*  Bank  Circulation. 


Date. 

Total. 

Notes  of 

Bank 

Price  of 

£5  and  upwards. 

Treasure. 

Gold. 

1797, 

28  Febraary 

^9,674,780 

;£  9,674,780 

£1,086,170 

100 

31  August 

11,114,120 

10,246,535 

4,089,620 

100 

1798, 

28  February 

13,095,830 

11,647,610 

5,828,940 

100 

31  August 

12,180,610 

10,649,550 

6,546,100 

100 

1799, 

28  February 

12,959,800 

11,494,150 

7,563,900 

100 

31  August 

13,389,490 

12,047,790 

7,000,780 

100 

1800, 

28  February 

16,844,470 

15,372,930 

6,144,250 

109 

31  August 

15,047,180 

13,448,540 

5,150,450 

109 

1801, 

28  February 

16,213,280 

13,578,520 

4,640,120 

107.85 

31  August 

14,556,110 

12,143,460 

4,335,260 

106.5 

1802, 

,  28  February 

15,186,880 

12,574,860 

4,152,950 

106.2 

31  August 

17,097,630 

13,848,470 

3,891,780 

103 

1803, 

1  28  February 

15,319,930 

12,350,970 

3,776,750 

103 

31  August 

15,983,330 

12,217,390 

3,592,500 

103 

1804. 

,  28  Februavy 

17,077,830 

12,546,560 

3,372,14C 

103 

31  August 

17,153,890 

12,466,790 

6,879,190 

103 

244       THE  BANK  OF  ENGLAND  RESTRICTION. 

The  Continental  System  had  begun  to  act.  The  mercantile 
ventures  of  the  last  year  proved  ruinous ;  the  enormous  im- 
portations at  fabulous  prices  required  to  be  paid  for ;  the 
unfortunate  military  expeditious  which  Great  Britain  was  now 
renewing  against  the  Continent  demanded  the  transmission  of 
gold.  England  was  paying  money  in  every  direction,  and  she 
Avas  selling  her  goods  nowhere.  No  one  watched  this  process 
of  exhaustion  more  carefully,  or  understood  its  consequences 
better,  than  Napoleon  himself. 

The  Bank,  following  its  invariable  routine  of  business,  took 
no  notice  of  the  sharp  fall  in  exchanges,  or  of  the  heavy  drain 
which  rapidly  reduced  its  treasure,  and,  instead  of  contracting 
its  issues,  allowed  them  slowly  to  expand,  according  to  the 
demand  for  discount.  From  £13,000,000  in  1808,  the  circu- 
lation in  notes  of  £5  and  upwards  rose  to  £  14,325,000  in  No- 
vember, 1809.  The  exchanges  indicated  already  a  difterence 
of  about  fifteen  per  cent  between  paper  and  gold.  Meanwhile 
the  government  expenses  requiring  transmission  of  gold  abroad 
had  increased  to  above  £  10,000,000  for  the  year.  The  exces- 
sive prices  of  that  class  of  goods  which  could  only  be  obtained 
from  the  Continent  stimulated  merchants  into  every  possible 
effort  to  procure  them.  Ships'  papers  were  regularly  forged  as 
a  matter  of  business ;  licenses  for  trading  were  obtained  at 
great  expense  from  both  governments.  Importations  were  by 
these  means  greatly  increased,  and  large  quantities  of  grain 
were  brought  in  to  supply  an  unusual  deficiency  in  the  harvest. 
The  receipts  of  cotton  were  more  than  doubled,  and  the  mar- 
ket was  again  overwhelmed  with  colonial  produce.  Thus  no 
opportunity  was  allowed  for  a  recovery  of  the  exchanges,  and 
the  country  continued  to  be  drained  steadily  of  its  gold. 


Date. 

Total. 

Noted  of 

Bank 

Price  of 

£5  and  upwiinls. 

Treasure. 

Gold. 

1805, 

28  February 

17,871,170 

13,011,010 

5,88.3,800 

103 

31  August 

16,-388,400 

11,862,740 

7,624,500 

103 

1806, 

28  t'ebruary 

17,730,120 

13,271,520 

5,987,190 

103 

31  August 

21,027,470 

10,757,930 

6,215,020 

103 

1807, 

28  I'ebru.ary 

16,960,680 

12,840,790 

6,142,640 

108 

31  August 

19,678,860 

15,432,990 

6,484,860 

108 

1808, 

28  I'chrunry 

18,188,860 

14,093,690 

7,866,470 

103 

81  August 

17,111,290 

12,993,020 

6,016,940 

108 

THE   BANK   OF    ENGLAND   RESTRICTION.  245 

Throughout  the  year  1810  the  same  process  was  coutinued. 
Again  the  importations  were  greatly  increased,  and  the  quan- 
tity of  grain  brought  from  abroad  was  far  in  excess  of  what 
had  been  imported  in  any  year  since  1801.  Wellington  was 
now  in  the  lines  of  Torres  Vedras,  requiring  continual  supplies 
of  gold.  The  military  efforts  made  by  England  on  the  Conti- 
nent were  greater  than  ever  befoi'e,  and  the  foreign  expenditure 
rose  beyond  £  12,000,000  for  the  year.  The  exchanges  con- 
tinued to  fall,  although  at  one  time  there  was  a  tendency  to 
recovery.  Gold  remained  at  about  the  same  premium  as  in 
1809,  while  the  government  and  the  public  equally  increased 
their  demands  on  the  Bank,  until  in  August  the  circulation 
of  large  notes  rose  to  £  17,570,000. 

If  in-edeemable  government  paper  had  been  forced  upon  the 
public  without  regard  to  its  wants,  until  within  a  space  of  two 
years  the  ciiri-ency  had  swelled  from  a  total  of  £17,000,000 
to  one  of  £  24,. 500,000,  it  scarcely  admits  of  a  doubt  that  the 
result  would  have  been  a  rise  in  prices  and  an  increase  of  spec- 
ulation. According  to  all  the  old  currency  theories,  such  ought 
now  to  have  been  the  case  with  England.  In  fact,  directly 
the  contrary  result  took  place.  During  the  last  months  of 
1809  and  the  whole  of  1810,  a  fall  of  prices  and  a  destruction 
of  private  credit  occurred,  which  for  severity  remains  perhaps 
to  this  day  without  a  parallel,  as  it  was  then  without  a  prece- 
dent. Half  the  traders  in  the  kingdom  became  bankrupt,  or 
were  obliged  to  compound.  Country  banks  by  dozens  were 
swept  out  of  existence.  Rich  and  poor  alike  were  plunged  in 
distress,  while  the  crash  extended  to  the  Continent  and  to 
America.  It  was  this  universal  collapse  of  credit  which,  by 
driving  the  whole  trading  class  for  assistance  to  the  Bank 
obliged  the  Bank  to  increase  its  issues.  Nothing  but  an  abso- 
lute refusal  of  discounts  could  have  prevented  suspension,  had 
the  Bank  at  this  moment  been  paying  its  notes  in  specie.  Ac- 
cording to  one  theory,  the  withdrawal  of  so  much  country- 
bank  paper  should  have  restored  gold  to  par,  since  it  is  very 
improbable  that  the  Bank  issues  supplied  the  vacancy.  This 
would  no  doubt  have  been  the  case,  if  the  depreciation  had 


246  THE    BANK    OF   KNGLAND   RESTRICTION. 

been,  as  is  usually  supposed,  the  result  of  over-issue  ;  but  in 
fact  the  foreign  debt  of  England  was  enormous ;  its  immediate 
payment  was  necessary  ;  gold  was  the  only  exportable  com- 
modity, and  gold  was  not  to  be  had.  Mr.  Baring  declared  in 
the  House  of  Commons,  that,  if  his  firm  wished  to  obtain  fifty 
thousand  pounds  sterling  for  transmission  abroad,  he  did  not 
know  how  such  a  sum  was  to  be  procured  even  at  a  premium 
of  fifty  per  cent.  To  export  more  bulky  goods  was  simply 
impossible.  At  this  time  the  British  merchant  w^as  sending 
sugar  by  sea  to  Salonica,  and  thence  on  horseback  through 
Servia  and  Hungary,  in  order  to  reach  Vienna  ;  one  parcel  of 
silk  sent  from  Bergamo  to  England,  by  way  of  Smyrna,  was 
twelve  months  on  its  passage  ;  another,  sent  by  way  of  Arch- 
angel, was  two  years.  The  British  government  attempted  to 
establish  a  smuggling  depot  at  Heligoland,  in  order  to  over- 
come the  obstructions  caused  by  the  Continental  System.  A 
single  licensed  cargo  to  a  French  port  cost  for  freight  alone 
twenty  times  the  cost  of  the  vessel  which  carried  it.  Gold 
alone  was  comparatively  easy  to  export,  and  naturally  bullion 
rose  in  value. 

In  all  this  there  is  clear  evidence  of  a  terrible  convulsion  in 
commerce,  and  no  doubt  of  a  previous  excessive  expansion  in 
credit,  followed  by  as  excessive  contraction  ;  but  there  is  noth- 
ing which  indicates  an  excess  of  currency  in  the  sense  which 
that  phrase  bears  in  regard  to  the  effect  of  forced  issues  on 
prices.  Undoubtedly  there  was  a  depreciation  of  ten  or  fifteen 
per  cent,  or  even  more,  in  paper  as  compared  with  gold,  and 
there  may  justly  V)e  a  question  whether  the  Bank  was  not 
bound  to  restrict  its  issues  till  that  difference  was  removed. 
But  so  long  as  the  usury  laws  remained  in  force,  the  Bank 
could  not  act  upon  the  exchanges  by  raising  its  rate  of  inter- 
est ;  and  to  refuse  accommodation  would  have  been  tlie  ruin 
of  such  merchants  as  had  hitherto  succeeded  in  surviving  the 
shock.  Even  had  the  Bank  resorted  to  this  desperate  measure, 
such  was  the  preponderance  of  foreign  payments  over  receipts 
from  abroad,  that  no  possible  pressure  could  have  immediately 
restored  the  balance  of  exchange.     In  ordinary  times  a  mone- 


THE   BANK   OF   ENGLAND   RESTRICTION.  217 

taiy  crisis  effects  this  result  by  reducing  prices  and  thus  mak- 
ing it  possible  to  export  goods  at  a  profit ;  but  it  is  difficult  to 
see  how  any  reduction  of  prices  could  have  had  such  an  effect 
in  1810,  since  for  years  before  that  time  it  had  been  impossi- 
ble to  obtain  in  Holland  and  Hamburg,  even  at  three  and  foiu* 
times  their  English  price,  the  goods  which  overwhelmed  the 
British  market.  The  only  result  of  Bank  contraction,  there- 
fore, must  have  been  to  stop  importations.  But  in  the  first 
place  the  general  fall  in  prices  was  alone  sufficient  to  produce 
this  result,  as  was  proved  in  1811.  And,  moreover,  grain  was 
at  famine  rates ;  the  people  must  be  fed  ;  the  foreign  expendi- 
ture of  the  government  also  defied  laws  of  political  economy, 
and  Wellington's  army  in  Portugal  required  millions  in  gold. 
If,  therefore,  the  Bank  had  attempted  to  put  a  still  more  se- 
vei'e  pressure  on  the  exchanges  than  already  existed,  it  would 
have  found  itself  paralyzed  by  the  government  at  its  first  step, 
and  in  the  struggle  which  must  have  followed  the  people  would 
have  been  ground  into  the  dust.  Even  under  the  liberal  sys- 
tem adopted,  there  was  a  time,  in  1811  and  1812,  when  the 
general  distress  shook  society  to  its  foundations.  Had  the 
Bank  wilfully  intensified  and  prolonged  this  distress,  it  is  not 
improbable  that  Napoleon's  Continental  System  might,  after 
all,  have  proved  the  greatest  success  of  his  life. 

The  fall  in  foreign  exchange  during  1808  and  1809  did  not 
attract  very  much  public  attention  until  Mr.  Ricardo  published 
a  pamphlet  on  the  subject,  —  "  The  High  Price  of  Bullion  a 
Proof  of  the  Depreciation  of  Bank-Notes."  Shortly  after  the 
meeting  of  Parliament  in  1810,  a  committee  was  appointed,  at 
the  instance  of  Mr.  Francis  Horner,  to  investigate  the  causes 
of  the  high  price  of  gold  bullion.  This  was  the  famous  "  Bul- 
lion Committee,"  whose  Report  made  so  marked  an  era  in 
currency  problems  that  it  might  almost  be  called  their  jjons 
asinorum.  Its  doctrines,  rejected  by  Parliament  in  1811  only 
to  be  triumphantly  adopted  in  1819,  acquired  through  the 
conversion  of  Sir  Robert  Peel  an  overruling  ascendency,  and, 
embodied  in  the  Bank  Charter  Act  of  1844,  still  hold  sway  in 
PZngland,  although  the  more  liberal  economists  have  long  since 
protested  against  the  application  given  to  them. 


248  THK    BANK    OF    KN'tJLAND    IJKSTRTCTIOX. 

"We  would  willingly  linger  over  the  Bullion  Report,  if  it  were 
possible  to  compress  the  subject  within  our  limits ;  but  this 
great  controversy  does  not  allow  of  narrow  treatment,  and  we 
prefer  to  lay  it  aside.  It  was  based  upon  three  propositions  : 
first,  that  Bank  paper  was  depreciated  as  compared  with  gold  ; 
secondly,  that  this  depreciation  was  caused  by  over-issues ; 
thirdly,  that  the  price  of  gold  and  the  state  of  foreign  ex 
change  should  regulate  the  issues  of  paper.  And  the  Report 
closed  by  recommending  that  the  Bank  should  be  obliged  to 
resume  payments  within  two  years. 

Had  the  government  been  in  the  hands  of  able  or  dexterous 
men,  Mr.  Homer's  resolutions,  in  which  the  substance  of  his 
Report  was  embodied,  need  not  have  been  so  difficult  to  deal 
with  as  they  proved.  The  first  proposition  was  indeed  incon- 
trovertible, and  no  sensible  being  could  have  fallen  into  the 
blunder  of  disputing  it.  The  third  was,  if  not  indisputable,  at 
least  not  necessary  to  dispute  mider  certain  limitations.  But 
the  second  was  very  far  from  evident  in  the  sense  which  Mr. 
Homer  gave  to  it,  and  Mr.  Thornton,  perhaps  the  highest 
authority  in  the  House,  appears  not  to  have  understood  it  as 
absolutely  excluding  the  idea  that  the  depreciation  might  have 
been  due  to  a  deeper  cause  ;  while  the  concluding  practical 
measure  was  supported  by  scarcely  any  one  besides  Mr.  Hornei-, 
its  author. 

But  the  government  was  held  by  a  class  of  men  equally  in- 
capable of  seeing  their  own  mistakes,  and  of  profiting  by  those 
of  their  opponents.  The  Ministers  began  by  plunging  head- 
long into  the  gi-osscst  absurdity  they  could  have  found.  They 
denied  that  Bank  notes  were  depreciated  at  all.  Assuming 
that  the  sale  of  coin  for  more  than  its  nominal  value  in  paper 
was  forbidden  by  law,  they  undertook  to  affirm  that  the  Bank 
note  and  the  giiinea  still  maintained  thair  relative  worth  in 
regard  to  each  other.  They  denied  that  bullion  was  the  true 
.standard  of  value,  and  they  atlirmed  that  it  was  the  stamp 
and  the  stamp  alone  which  made  the  guinea  a  standard.  They 
denied  that  the  amount  of  circulation  affected  the  price  of 
gold,  ur  that   the  Bank    itisucs  had  anything  to  do  with  the 


THK    BANK    OF   ENGLAND   RESTRICTION.  249 

course  of  exchange.  Yet  at  intervals  they  were  obliged  prac- 
tically to  admit  the  very  conclusions  which  they  were  so  eager 
to  contest,  until  all  their  really  accurate  statements  and  forci- 
ble reasoning  became  inextricably  entangled  and  hidden  from 
sight  in  a  confused  mass  of  inconsistent  arguments. 

On  the  other  hand,  they  had  as  opponents  some  of  the  ablest 
men  whom  England  has  ever  produced.  It  was  pitiable  to 
watch  the  torture  of  Mr.  Vansittart,  Mr.  Rose,  and  Lord  Cas- 
tlercagh,  in  the  gi'asp  of  Mr.  Horner,  Mr.  Huskisson  and  Mr. 
Canning.  The  mistakes  of  the  bullionists  are  hidden  by  the 
brilliancy  of  their  oratory,  the  sparkle  of  their  wit,  the  vigor 
and  solidity  of  their  genius.  Sympathy  is  irresistibly  attracted 
to  their  side,  when  it  is  seen  what  magnificent  powers  they 
were  obliged  to  use,  in  order  to  convince  an  unreasoning 
iTiajority  of  the  simplest  principles  in  practical  business.  And 
yet,  after  all  these  efforts,  they  thought  themselves  fortunate 
in  being  defeated  by  a  vote  of  only  two  to  one. 

It  would  have  been  happy  for  Mr,  Vansittart  and  his  asso- 
ciates, had  they  been  willing  to  rest  satisfied  with  this  negative 
upon  the  resolutions  ofiered  by  Mr.  Horner.  Victorious  in 
defence,  they  thought  it  necessary  to  establish  their  advantage 
permanently  by  a  vigorous  assertion  of  what  they  deemed  the 
true  principles  of  credit  and  currency.  Mr.  Vansittart  accord- 
ingly moved,  in  his  turn,  a  long  series  of  resolutions. 

The  third  of  these  has  been  the  chief  means  of  preserving 
Mr.  Vansittart's  memory.  It  was  worded  as  follows  :  —  "  Re- 
solved, That  it  is  the  opinion  of  this  committee  that  the  prom- 
issory notes  of  the  Bank  of  England  have  hitherto  been,  and 
are  at  this  time,  held  in  public  estimation  to  be  equivalent  to 
the  legal  coin  of  the  realm,  and  generally  accepted  as  such  in 
all  pecuniary  transactions  to  which  such  coin  is  lawfully  ap- 
plicable." 

This  position  was  beyond  the  reach  of  argument,  but  not  of 
ridicule.  In  the  whole  range  of  Parliamentary  oratory,  there 
are  few  examples  of  sarcasm  so  happy  as  that  which  Mr.  Can- 
ning poured  out  upon  this  unfortunate  resolution  in  his  speech 
of  the  13th  of  May,  1811.    But  it  was  all  in  vain.    The  Housu 


250  THE   BANK   OF   ENGLAND   RESTRICTION. 

sustained  Mr.  Vansittart  by  a  vote  of  76  to  24  ;  and  from  that 
day  to  this  the  resohition  has  stood,  an  object  of  laughter  and 
wonder  to  each  succeeding  generation. 

Thus  the  Bulhon  Committee  was  disposed  of,  but  the  subject 
was  farther  thaxi  ever  from  a  satisfactory  settlement.  Within 
two  months  of  the  passage  of  this  resolution,  in  which  Parlia- 
ment had  gravely  pledged  the  people  to  believe  that  Bank 
notes  were  equivalent  to  coin,  two  events  almost  simultane- 
ously occurred,  which  obliged  the  government  to  take  active 
measures  in  order  to  compel  the  people  to  accept  these  same 
Bank  notes.  The  first  of  thest  difficulties  was  due  to  an  un- 
expected interpretation  of  the  law.  Two  obscure  individuals, 
one  a  Jew  pedler  named  De  Yongc,  the  other  a  guard  on  the 
Liverpool  mail-coach,  had  been  taken  in  the  act  of  buying 
guineas  at  a  premium,  —  an  act  supposed  to  be  illegal,  and, 
like  the  exportation  of  coin,  subjecting  the  delinquent  to  the 
penalties  of  a  misdemeanor.  Government  determined  to  make 
an  example  of  these  persons,  and  they  were  accordingly  in- 
dicted under  an  obsolete  statute  of  Edward  VI.,  and,  the  facts 
being  clearly  proved,  they  were  duly  found  guilty  of  the  acts 
charged  in  the  indictment.  But  their  counsel  raised  the  point 
of  law,  that  the  act  tm  laid  in  the  indictment  and  proved  in 
evidence  was  not  an  offence  in  law,  inasmuch  as  the  statute 
of  Edward  VI.  was  intended  to  apply  only  to  the  exchange  of 
one  sort  of  coin  for  another.  Judgment  was  respited  until  tiie 
opinion  of  the  twelve  judges  in  the  Court  of  the  Exchequer 
Chamber  could  be  obtained  on  this  point ;  but  at  length,  on 
the  4th  of  July,  1811,  Lord  Ellenborough  pronounced  the 
unanimous  decision  of  the  Court,  that  the  exchange  of  guineas 
for  bank-notes,  such  guineas  being  taken  at  a  higher  value  than 
they  were  current  for  under  the  King's  proclamation,  was  not 
an  offence  against  the  statute  upon  which  the  indictment  was 
founded.  Tlius  the  whole  government  theory  in  regard  to 
paj)er  money  was  at  once  ovcrtln-own. 

Almost  at  the  same  time  with  this  blow,  the  famous  third 
resolution  was  attacked  from  another  side  with  a  vigor  far 
more  alarming.     It  was  well  understood  that  the  law  of  1797 


THE  BANK  OF  ENGLAND  KESTRICTION.       251 

had  by  no  means  made  Bank  paper  a  legal  tender.  The  case 
of  Grigby  v.  Oakes,  in  1801,  had  established  the  principle  that 
Bank  of  England  notes  might  be  refused  by  the  creditor,  and 
the  debtor  must  in  that  case  discharge  his  debt  in  coin.  Prac- 
tically, however,  the  Bank  note  had  bee^  received  as  equiva- 
lent to  coin,  except  in  some  remote  districts  of  Ireland,  where 
the  unfortunate  peasants  were  obliged  to  buy  guineas  at  a 
premium  from  the  landlord,  in  order  to  discharge  their  rents. 

The  government  policy,  however,  seemed  purposely  calcu- 
lated to  challenge  attack,  and  it  was  perfectly  natural  that  the 
bullionists,  who  saw  no  limit  to  the  possible  depreciation,  should 
resort  to  the  last  means  now  left  for  compelling  government 
to  check  it.  Lord  King,  a  nobleman  of  high  character  and 
strong  liberal  principles,  accordingly  issued  a  circular  to  such 
of  his  tenants  as  held  leases  dated  before  the  depreciation 
began,  requiring  them  in  future  to  pay  their  rents  either  in 
gold  or  in  Bank  paper  representing  the  market  value  of  gold. 
Even  the  dignity  of  the  House  of  Lords  was  almost  overthrown 
by  this  unexpected  attack.  A  storm  of  indignation  burst  on 
the  head  of  Lord  King,  whose  practical  sarcasm  was  more  ex- 
asperating to  the  Ministry  than  even  the  satire  of  Mr.  Canning. 
But  Lord  King  was  in  his  right ;  he  was  acting  from  conscien- 
tious motives,  and  he  would  not  yield.  Yet,  after  the  passage 
of  Mr.  Vansittart's  resolution,  this  act  dii*ectly  tended  to  bring 
Parliament  into  public  contempt.  "  My  Lords,"  said  Lord 
Grenville,  in  opening  his  speech  on  the  subject,  "it  is  painful 
to  me  to  observe,  that  I  cannot  remember  in  the  course  of  my 
life  to  have  ever  seen  the  Ministers  of  this  country  placed  in 
so  disgraceful  a  situation  as  that  in  which  they  appear  this 
night."  Obviously  some  action  had  become  necessary,  and 
yet  Ministers  hesitated,  in  the  vague  hope  that  Lord  King's 
example  would  not  be  followed.  The  judges'  decision  in  De 
Yonge's  case,  however,  turned  the  scale ;  but  even  then,  such 
was  the  general  dislike  to  a  law  of  legal  tender,  and  such  was 
the  difficidty  of  forcing  a  contraction  in  the  Bank  discoimts, 
that  they  were  placed  in  a  most  embarrassing  situation.  There 
was  apparently  a  third  alternative,  —  that  of  allowing  Loixi 


252  THE   BANK   OF   ENGLAND   RESTRICTION. 

King  to  proceed  ;  but  in  fact  this  would  have  estabhshed  two 
scales  of  prices  throughout  the  country,  and  the  result  woidd 
ultimately  have  been  that  the  Bank,  rather  than  endure  the 
discredit  thus  attached  to  its  paper,  would  have  preferred  to 
withdraw  it  wholly. 

The  Ministers  were  saved  from  this  dilemma  by  Lord  Stan- 
hope, one  of  their  ordinary  opponents.  He  invented  a  meas- 
lu-e  which  is  certainly  one  of  the  curiosities  of  legislation,  — 
a  measure  which  disposed  of  Lord  King,  and  established  the 
law  for  such  cases  as  that  of  De  Yonge,  but  neither  made 
paper  a  legal  tender,  nor  contained  the  trace  of  a  legal  princi- 
ple. The  act,  which  has  since  been  commonly  known  as  Lord 
Stanhope's,  made  the  purchase  or  sale  of  coin  for  more  than 
its  legal  value  in  Bank  notes  or  other  lawful  money  a  misde- 
meanor, as  also  the  reception  or  payment  of  notes  for  less  than 
their  nominal  value ;  and  it  further  deprived  the  creditor  of 
the  power  of  distraining,  hi  case  a  tender  in  Bank  notes  to  the 
amount  of  the  debt  had  been  made. 

Sti'ange  to  say,  this  preposterous  statute  completely  an- 
swered its  purpose.  The  courts  seem  never  to  have  been 
called  upon  to  interpret  it,  nor  did  any  creditor  attempt  to  en- 
force his  rights.  The  law  officers  of  the  crown  did  not  venture 
to  express  any  opinion  upon  the  bill  while  on  its  passage 
through  Parliament.  During  the  ten  years  that  the  Restric- 
tion Act  still  remained  in  force,  with  this  measure  of  Lord 
Stanhope's  as  its  supplement,  no  man  in  England  i-cuUy  knew 
what  the  law  was  as  affecting  the  currency,  or  the  e.xtent  to 
which  Bank  notes  were  recognized  as  the  lawful  equivalent  of 
coin.  In  the  failure  of  any  judicial  declaration  on  the  subject, 
we  can  only  refer  to  an  opinion  expressed  in  debate  by  Sir 
Samuel  Romilly.  That  eminent  lawyer  pointed  out  to  Parlia- 
ment, that,  if  the  object  of  government  were  to  prevent  Lord 
King  or  any  other  landlord  or  creditor  from  insisting  upon 
payment  in  coin,  the  bill  was  ftir  from  answering  its  ])urposc. 
Creditoi-H  woidd  still  have  the  right  to  deujand  gold,  and  no 
court  C(Mild  refuse  in  such  a  case  to  give  judgment  against 
the  debtor,  who  was  yet  apparently  debarred  by  the  act  from 


THE  BANK  OF  ENGLAND  RESTRICTION.       253 

obtaining  gold  without  incurring  the  penalties  of  a  misde- 
meanor. The  creditor,  having  obtained  his  judgment,  need 
not,  and  probably  would  not,  proceed  by  way  of  distraint  upon 
the  goods  of  his  debtor.  If  a  landlord,  he  would  resort  to  an 
ejectment.  In  any  case,  however,  he  might  proceed  against 
the  person,  and  shut  up  the  debtor  in  jail  indefinitely,  or  until 
he  made  himself  liable  to  further  imprisonment  by  purchasing 
coin.  There  appears,  however,  to  have  been  one  means  of  es- 
cape left  open  to  him  still.  The  law  only  prohibited  the  trade 
in  coin,  not  that  in  bullion.  If  the  debtor,  therefore,  chose  to 
purchase  bullion,  and  have  it  coined  at  the  mint,  there  seems 
to  be  no  reason  why  he  might  not  so  have  evaded  the  law. 

Ministers,  however,  gave  it  to  be  understood  that,  if  cred- 
itors pressed  their  rights  to  this  point,  it  would  become  neces- 
sary for  Parliament  to  intervene  by  making  Bank  notes  a  legal 
tender.  It  is  difficult  to  see  precisely  what  was  gained  to  the 
coimtry  by  a  resort  to  these  absurd  subterfuges,  or  why  a  legal- 
tender  act  should  not  have  been  passed  outriglit,  since  Lord 
Stanhope's  bill  was  intended  to  have,  and  did  in  fact  produce, 
the  same  effect,  except  that  it  went  much  beyond  the  limits 
of  reasonable  legislation,  and  accomplished  its  purposes  only 
by  creating  a  new  offence  hitherto  unknown  to  the  law.  The 
plea  that  it  successfully  met  the  emergency  is  merely  an  excuse 
fur  slovenly  legislation. 

This  act,  hurried  through  Parliament  in  July,  1811,  just  at 
the  close  of  the  session,  was  the  sole  i-esult  of  the  currency 
controversy,  unless  Mr.  Vansittart's  resolutions  are  worthy  of 
sharing  its  credit.  From  this  time  it  became  evident  that  no 
interference  by  government  in  monetary  matters  was  to  be 
looked  for,  but  that  the  Bank  was  to  retain  that  excliisive 
control  which  it  had  hitherto  possessed.  This  result  was 
probably  fortunate  for  the  country.  The  Bank  directors,  if 
not  great  masters  of  statesmanship,  were  at  least  convinced 
that  any  arbitrary  action  of  their  own  would  only  aggravate  the 
evils  of  the  situation,  while,  if  the  foreign  and  domestic  policy 
of  the  government  in  other  respects  furnishes  any  idea  of  the 
probable  result  of  its  interference  in  Bank  affairs,  there  is  no 


254  THK    BANK    OF   ENGLAND   KESTRICTION. 

disaster  which  it  might  not  have  brought  upon  the  credit  and 
resources  of  the  community. 

The  great  financial  crash  of  1809  and  1810  threw  the 
country  into  a  state  of  profound  distress  and  depression,  but 
it  had  the  effect  of  pi'eparing  the  way  for  a  rapid  change  at 
the  first  sign  of  military  success.  The  year  1811  marked 
perhaps  the  lowest  point  of  England's  fortunes  ;  but  in  the 
autumn  of  that  year  the  prospect  became  brightei*.  Napo- 
leon had  now  broken  with  Russia,  and  was  preparing  his  great 
campaign  to  Moscow,  while  Wellington  had  achieved  unusual 
success  in  Portugal,  There  was  hope  that  both  the  Russian 
and  the  Spanish  ports  would  soon  be  reopened,  while  the 
colonies  and  South  America  were  actually  consuming  agnin 
large  quantities  of  British  goods.  Importations  into  England 
had  meanwhile  fallen  to  a  very  low  point,  and  the  exchanges 
were  slowly  creeping  upwards.  The  pressure  upon  the  Bank 
for  assistance  and  for  discounts  fell  off  as  credit  recovered 
itself,  until  the  circulation,  which  had  reached  £17,570,000  in 
August,  1810,  contracted  itself  to  £15,365,000  in  August, 
1812,  the  small  notes  excluded. 

What  was  only  hope  in  1811  became  certainty  in  1812. 
Napoleon  was  driven  both  from  Russia  and  from  Spain.  In 
another  year  all  Europe  was  iogain  open  to  British  commerce, 
and  in  April,  1814,  peace  was  restored.  During  this  period, 
many  of  the  dangerous  symptoms  of  1807  and  1808  again 
made  their  appearance ;  the  circulation  had  become  much 
smaller,  but  nevertheless  prices  rose  ;  speculation  was  as  gen- 
eral, if  not  80  desperate,  as  in  1808  ;  the  Continent  was  flooded 
with  Englisli  goods,  while  in  England  itself  the  price  of  wheat 
hud  risen,  in  1812,  to  nearly  100  shillings  the  quarter. 

But  although  the  circulation  was  diminished  by  £2,000,000. 
although  public  contidenco  was  so  far  restored  that  prices  geu 
erally  rose,  although  the  exchanges  became  considerably  more 
favorable,  still  gold  showed  no  sign  of  falling  in  value.  The 
premium  had  risen  to  forty-two  per  cent  in  September,  1812, 
and  after  various  fluctuations  it  was  again  forty-two  per  cent 
in  the  autuum  of  1813.     Then  at  last  the  fall  began,  and  for 


THE   BANK   OF   ENGLAND   RESTRICTION.  255 

a  twelvemonth  gold  continued  to  decline  steadily,  nntil,  at  the 
close  of  1814,  the  premium  was  less  than  twelve  per  cent. 
And  it  should  be  remarked  that  the  rise  in  value  of  Bank 
paper  was  coincident  with  another  very  large  extension  of 
issues,  which  now  reached  £18,700,000. 

Tliis  extension  was  due  partly  to  government,  but  partly, 
as  in  1810,  to  the  private  demand.  The  whole  fabric  which 
speculators  had  raised  for  themselves  on  the  apparently  solid 
basis  of  supposed  European  necessities  had  crumbled  to  pieces 
at  tfie  first  shock.  Europe  was  too  poor  to  buy  or  too  thor- 
oughly plundered  to  pay  for  English  merchandise.  The  spec- 
ulations abroad  failed  at  the  very  time  when  a  prodigious 
fall  in  the  price  of  grain  ruined  the  English  fai-mers  and  the 
country  bankers,  Avho  depended  upon  agricultural  prosperity. 
The  collapse  was  general  and  disastrous  ;  England  was  again 
plunged  into  distress  at  the  very  time  when  her  success  was 
most  brilliant;  for  two  years  after  1814,  trade  stagnated  and 
merchants  became  bankrupt,  without  the  slightest  reference 
to  the  price  of  gold  or  the  amount  of  circulation  ;  nor  is  there 
any  reason  to  suppose  that  the  Bank  could  have  prevented,  or 
even  shortened,  the  distress  by  any  action  upon  the  currency. 

However  devoted  might  be  the  adherence  of  theorists  to 
their  own  favorite  currency  dogma,  the  most  ardent  follower 
of  Mr.  Homer  could  scarcely  have  regretted  that  the  princi- 
ples of  the  bullion  report  had  not  been  made  obligatoiy  as  a 
rule  of  action  for  the  Bank  during  the  year  1815.  The  evils 
of  inconvertible  paper  are  no  doubt  many,  but  there  are  also 
advantages  in  the  system  during  times  of  political  trouble  ; 
and  it  is  impossible  to  deny  that  the  violent  convulsions  of 
181.5  would  have  proved  too  severe  a  trial  for  any  but  the 
most  elastic  form  of  credit.  During  January  and  February, 
gold  had  stood  at  about  115,  as  compared  with  paper.  The 
Emperor  returned  from  Elba  and  arrived  in  Paris  on  the  20th 
of  March.  The  next  quotation  of  gold  is  on  the  4th  of  April, 
when  at  one  leap  it  rose  to  137,  almost  as  high  a  point  as  it 
had  reached  during  the  war.  The  exchanges  went  down  with 
almost  equal   violence ;  but   the    Bank  circulation  remained 


25(3  THE   BANK   01-    KNGLANI)   RESTRICTION 

absolutely  stationaiy.  After  the  first  panic  was  over,  gold 
began  again  to  fall  slowly,  and  on  the  news  of  Waterloo  it  de- 
clined to  128;  on  the  1st  of  September  it  resumed  the  posi- 
tion it  had  held  in  January  ;  but  instead  of  resting  there,  it 
continued  to  fall,  until  at  the  close  of  the  year  the  premium 
was  only  five  per  cent ;  and  in  July,  181G,  it  was  nothing  at 
all,  or  at  most  only  about  one  per  cent.  The  Bank  circula- 
tion meanwhile  expanded  or  contracted  itself  according  to  the 
demand,  averaging  rather  more  than  £17,500,000,  exclusive 
of  the  small  notes.* 

The  equilibrium  was  therefore  restored,  and  it  was  restored 
without  interference  by  government.  The  system  vindicated 
itself,  and  is  justly  entitled  to  the  high  credit  that  properly 
belongs  to  so  brilliant  a  success.  But,  unfortunately,  this 
very  success  has  given  occasion  for  another  hot  dispute  among 
currency  writers,  involving  the  whole  question  in  its  historical 
as  well  as  in  its  theoretical  bearings  ;  and  tedious  as  the  sub- 
ject may  be,  we  are  obliged  again  to  turn  aside,  and  to  exam- 
ine the  opposing  theories  so  obstinately  and  positively  ad- 
vanced. 

It  is  almost  needless  to  repeat  that  there  were  in  1816,  and 
that  there  still  are,  two  classes  of  political  economists,  so  far 
as  the  currency  is  concerned.  The  one  has  found  in  bank 
paper  and  its  over-issues  an  explanation  for  every  rise  or  fall 

*  Bank  Circulation. 

n.»„  >P„..i  Notes  of  Bunk  Price  of 

****•  ^°^^-  £5andupw»nis.        Treasure.  Gold. 

1809,  28  February  £18,542,860  .£14,241,300  i!  4,488,700  115.5 
31  AiiRiLst  19,674,180  14,393,110  3,652,480  115 

1810,  28  February  21,019,600  16,159,180  3,601,410  115 
31  August  24,798,990  17,570,780  3,191,860  115 

1811,  28  F^ebruiiry  23,360,220  16,246,130  3,360,940  118.75 
81  Aupust  23,286,860  15,692,490  3,243,300  125 

1812,  29  February  23,408,320  16,961,290  2,983,190  122 
31  Augu.st  23,026,880  16,386,470  3,099,270  128.5 

1813,  27  Febniary  23,210,980  15,497,320  2,884,500  130 
81  August  24,828,120  16,790,980  2,712,270  142 

1814,  28  February  24,801,080  10,465.640  2,204,430  140 
31  August  28,868,290  18,703,210  2,097,080  116.5 

1815,  28  Febriuiry  27,261,650  18,226,400  2,036,910  115 
31  August  27,248,670  17,766,140  3,409,040  116 


THE   BANK   OF   ENGLAND   RESTRICTION.  257 

in  prices,  and  for  every  financial  disaster.  The  other  has 
denied  to  sucli  a  medium  of  exchange  any  influence  whatever 
upon  prices,  and  insists  that,  if  every  bank-note  were  de- 
stroyed, speculation  and  abuses  of  credit  would  flourish  not 
less  than  now.  The  bullionists  of  1810  and  their  successors 
were  strong  in  the  belief  that  the  Bank  issues  did  control 
prices,  and  the  price  of  gold  especially.  They  were,  therefore, 
obliged  to  explain  how  it  happened  that  gold  fell  to  par,  or 
about  forty  per  cent,  while  the  Bank  issues  were  actually  in- 
creased.    Obviously  the  dilemma  was  serious. 

The  bullionists,  however,  had  a  reply,  and  a  very  reasonable 
one  ;  we  quote  it  as  given  by  Mr.  McCulloch,  whose  opinion  is 
always  entitled  to  weight.  Mr.  McCulloch's  theory  is,  that, 
although  no  contraction  of  Bank  issues  occurred  which  could 
explain  the  fall  in  gold,  yet  there  was  such  a  contraction  in 
the  entire  circulation,  taking  the  country  banks  into  the  cal- 
culation ;  and  that  the  rise  in  value  of  Bank  of  England 
paper  was  in  fiict  due  to  the  destruction  of  country  bank- 
notes during  the  disastrous  years  of  1814,  1815,  and  181G. 
And  if  the  inquiry  be  carried  a  step  further  by  seeking  the 
cause  of  these  disasters  themselves,  Mr.  McCulloch  explains 
that  the  fall  of  grain  from  155  shillings  the  quarter,  in  1812, 
to  67  shillings,  in  1814,  had  spread  universal  ruin  among  the 
agricultural  class. 

We  are  far  from  affirming  positively  that  so  natural  and  so 
obvious  an  explanation  as  this  is  not  the  correct  one ;  yet  we 
are  obliged  to  confess  that  the  view  taken  by  Mr.  Tooke  and 
Mr.  Fullarton  appears  to  our  eyes  more  philosophical  and 
more  exact  than  that  of  Mr.  McCulloch.  They  maintained 
that  the  fall  in  gold  was  due  simply  to  the  fact  that,  with  the 
final  turn  of  exchange  in  favor  of  England,  gold  ceased  to  be 
an  object  of  demand,  and,  like  other  commodities  in  the  same 
position,  rapidly  fell  to  its  ordinary  value. 

Mr.  McCidloch's  facts  are  unquestioned,  but  they  appear  to 
be  only  a  part  of  the  truth.  The  prodigious  decline  in  the 
price  of  grain  was  coincident  with  a  very  general  decline  in 
prices,  which  naturally  checked  importations  and  stimulated 

Q 


258  THE   BANK   OF  ENGLAND   RESTRICTION. 

export.  The  grain  alone  which  was  imported  in  1814  is  esti- 
mated at  £  2,800,000  iu  value  :  in  1815  it  was  but  £  800.000, 
and  in  1816  only  £940,000.  Silk  and  wool,  cofFee,  flax,  lin- 
seed, and  most  of  the  great  staples  of  import,  fell  off  in  the 
same  way  between  1814  and  1816.  Under  any  circumstances 
the  exchanges  must  have  risen  without  regard  to  the  currency, 
and  gold  must  have  fallen,  since  considerable  sums  were  actu- 
ally brought  from  abroad  during  1815  and  1816. 

The  force  of  this  argument  becomes  evident  by  comparison 
with  previous  cases.  If  the  rise  in  exchange  and  the  appre- 
ciation of  paper  in  1815  and  1816  were  caused  by  the  with- 
drawal of  private  bank-notes,  the  same  reason  should  hold 
good  for  the  similar  events  in  1814.  If  at  the  later  time  the 
currency  were  so  depreciated  from  excess  as  to  regain  its  value 
only  by  contraction,  it  was  certainly  more  in  need  of  that  re- 
lief at  the  earlier.  Yet  a  fall  of  thirty  per  cent  in  gold  was 
then  coincident  with  an  increase  of  paper  throughout  the 
coimtry. 

Allowing,  however,  that  Mr.  McCulloch  is  right,  and  that 
the  restoration  of  paper  was  caused  by  involuntary  contraction, 
that  contraction  was  at  all  events  only  temporary,  and  the  re- 
establishment  of  the  credit  of  the  country  banks  of  issue  should 
have  renewed  the  depreciation.  The  Bank  issues  rose  iu  1817 
and  1818  to  a  higher  point  than  ever  before,  and  the  country 
banks  had  again  extended  their  credit  in  every  direction. 
Under  these  circumstances,  the  depreciation  should  have  been 
very  great,  even  after  every  reasonable  allowance  had  been 
made  ;  yet  in  fact  gold  was  at  a  premium  of  only  about  five 
per  cent,  and  this  slight  advance  ajipears  to  have  been  caused 
merely  by  a  temporary  pressure  on  the  foreign  exchanges 
which  will  presently  be  exj)laiued. 

If  these  arguments  seem  still  insufficient  to  show  that  the 
theory  of  excessive  issues  does  not  fully  meet  the  difficulties 
of  the  case,  we  can  only  compare  the  circulation  of  1814  and 
1815,  which  is  said  to  have  lost  tweuty  per  cent  or  more  of 
its  value  thro\jgh  its  excess,  with  that  which  existed  after  spe- 
cie payments  were  resumed.     Such  comparisons  are  not  a  fair 


THE  BANK  OF  ENGLAND  RESTRICTION.       259 

proof  of  either  excess  or  deficiency,  since  the  public  demand 
varies,  and  the  same  amount  of  circulation  is  at  one  time  less 
and  at  another  more  than  is  required.  Allowing  for  such 
variations,  we  may  still  venture  to  compare  the  three  different 
periods  of  general  expansion  between  1813  and  1825.  The 
small  notes  having  been  withdrawn  at  the  resumption,  and 
their  place  supplied  by  coin,  it  is  necessary  to  exclude  these 
in  each  case. 

The  highest  point  reached  by  the  Bank  circulation  in  any 
quarterly  average  between  1812  and  1815  was  £  19,007,000 
in  the  third  quarter  of  1814;  the  price  of  gold  being  about 
112.  Between  181G  and  1822,  the  highest  average  was  in 
the  second  quai-ter  of  1817,  or  £21,517,000,  and  it  remained 
above  £  20,000,000  until  July,  1818,  the  country  banks  ex- 
panding generall}^  Gold  was  then  at  about  105.  Between 
1823  and  the  close  of  1825,  the  highest  average  was  in  the 
first  quarter  of  1825,  a  time  of  universal  expansion,  when  it 
reached  £20,665,000,  the  Bank  redeeming  its  notes  in  coin. 

If,  then,  two  thirds  or  three  fourths  of  the  whole  depivcia- 
tion  was  removed  in  1814  without  any  withdrawal  of  paper; 
if  the  circulation  was  restored  to  its  widest  range  in  1818 
without  any  effect  of  consequence  upon  the  price  of  gold  ;  and 
if,  after  the  resumjition,  the  circulation  remained  undiminished 
in  amount,  and  its  issue  subject  to  the  same  general  laws  as 
before,  —  there  seems  to  be  no  necessity  for  resorting  to  the 
theory  of  involuntary  contraction  in  order  to  explain  the  fall 
of  gold  in  1810.  There  is  no  reason  to  dispute  that  theory, 
if  it  is  understood  to  mean  merely  that  this  contraction  was 
itself  a  part  of  a  general  movement  of  trade  and  credit,  and 
as  such  that  it  contributed  to  hasten  the  result.  But  if  more 
than  this  is  intended,  it  appears  to  us  that  the  effbct  produced 
was  entirely  out  of  proportion  to  the  cause  assigned. 

The  whole  subject  of  private  banking,  for  many  years  as- 
signed as  the  source  of  all  financial  troubles,  has  in  fact  very 
little  to  do  with  the  question  of  depreciation  during  the 
French  wars.  The  country  banks  held  then  precisely  the 
same   position  they  had  held  before  suspension,  nor  did  the 


260  THE   BANK   OF   ENGLAND   RESTRICTION. 

resumption  change  it.  They  never  suspended  payments.  At 
any  time  gold  might  have  been  demanded  for  their  notes.  At 
all  times  they  did  in  fact  redeem  their  notes  on  demand,  by 
exchanging  them  for  those  of  the  Bank  of  England.  Their 
circulation,  therefore,  was  limited  by  that  of  the  Bank,  and 
the  same  general  laws  controlled  the  whole. 

Coimtry  bank  paper  could  not  have  been  in  excess  of  the 
public  wants  then,  any  more  than  it  could  now  be,  although 
the  credit  of  such  banks  might  be,  and  no  doubt  was,  abused 
then,  as  it  may  be  now.  On  the  other  hand,  the  Bank  of 
England  was  not  obliged  to  redeem  its  notes.  There  is  no 
doubt  that,  through  the  channel  of  permanent  loans  to  gov- 
ernment, it  might  have  forced  any  given  amount  of  paper  into 
circulation,  had  it  chosen  to  do  so.  But  it  did  not  force  a 
single  note  upon  the  public.  It  lent  notes,  but  never  paid 
them  away.  At  the  end  of  two  months  every  such  loan  had 
to  be  paid  back  into  the  coffers  of  the  Bank  by  the  borrower ; 
and  although  the  advances  to  government  were  to  some  degree 
permanent,  in  the  first  place  they  were  not  excessive,  and  in 
the  second  place,  as  has  been  already  shown,  they  tended  di- 
rectly to  lower  the  private  demand.  Whatever  action  may 
have  been  caused  by  the  Restriction  was  upon  credit  in  the 
first  place,  and  not  upon  currency.  The  cncounvgemeut  it 
may  have  afforded  to  speculation  could  not,  however,  have 
been  very  great,  or  ten  yeai's  would  not  have  passed  without 
showing  it.  But  when  taxes,  bad  seasons,  or  the  operations 
of  war,  or  other  caiises,  combined  to  raise  prices  and  to  stimu- 
late speculation,  the  credit  system  was  not  then,  nor  is  it  now, 
adapted  to  check  the  rise.  And  when  a  sttignation  in  business 
and  a  fall  in  prices  followed,  as  was  sure  ultimately  to  be  the 
case,  the  circulation  contracted  as  a  necessary  consequence. 
But  in  every  instance,  before  the  resumption  and  since,  the 
rise  in  prices  has  preceded  the  expansion,  and  the  fall  has  pre- 
ceded the  contraction. 

In  the  early  part  of  1817  the  supply  of  bullion  in  the  Bank 
had  risen  to  £  10,000,000,  the  average  total  circulation  for 
the  quarter  being  somewhat  in  excess  of  £  27,000,000,  while 


THE   BANK   OF   ENGLAND   RESTRICTION  261 

the  exchanges  were  considerably  above  par.  The  directors, 
therefore,  considered  it  safe  to  try  the  experiment  of  partial 
resumption,  and  by  a  series  of  steps  taken  during  this  year 
they  imdertook  to  redeem  all  notes  dated  previous  to  the  1st 
of  January.  This  was,  in  fact,  resumption.  During  the  next 
two  years  any  holder  of  Bank  notes  could  obtain  gold  for 
them  at  the  Bank,  either  directly,  or  by  exchanging  them  for 
such  as  were  dated  previous  to  the  1st  of  Jaiuiary,  1817. 
There  is  no  reason  to  doubt  that,  had  the  exchanges  remained 
firm,  there  would  have  been  no  further  question  as  to  an  easy 
and  regular  return  to  the  normal  condition  of  the  currency. 

But,  unfortunately,  the  year  1817  was  one  of  renewed  specu- 
lation, and  the  imports  again  rose  to  an  extravagant  point. 
Grain  alone  to  the  value  of  £17,300,000  was  brought  into 
England  in  the  two  years  1817  and  1818.  Another  cause 
which  could  not  well  have  been  foreseen  tended  powerfully  to 
depress  the  exchanges  and  to  carry  gold  abroad.  Nearly  all 
the  governments  of  Europe  were  at  this  time  Vjorrowing  large 
sums  of  money,  and  the  English  capitalists  negotiated  several 
of  their  largest  loans.  How  much  money  was  sent  abroad  for 
this  purpose  it  is  not  easy  to  say,  but  certainly  not  less  than 
,£10,000,000.  The  effect  upon  exchange  was  immediate,  yet 
the  extreme  variation  in  gold  was  not  more  than  five  per  cent, 
although  no  effort  of  any  kind  was  made  to  counteract  the 
pressure.  So  far  from  resorting  to  the  theory  of  excessive  issues 
for  an  explanation  of  this  temporaiy  rise  in  gold,  one  may  well 
feel  surprise  that,  under  the  circumstances,  there  was  not  a 
much  greater  disturbance  of  the  market.  The  return  of 
peace  must  have  largely  increased  English  resources,  to  enable 
them  to  bear  so  easily  the  pressure  of  enormous  foreign  pay- 
ments. 

But  even  the  slight  variation  of  five  per  cent  which  did 
exist  was  not  of  long  duration.  Again  in  1819,  as  before  in 
1816  and  in  1814,  the  system  vindicated  itself  without  artifi- 
cial pressure,  by  the  mechanical  operation  of  its  own  laws. 
The  excessive  importations  of  1817  and  1818  resulted  in  stag- 
nation of  business  and  decline  in  prices.     The  foreign  loans 


262  THE   BANK   OF   ENGLAND   RESTRICTION. 

were  discharged.  The  exchanges,  relieved  from  pressure,  rose. 
The  demand  for  gold  ceased,  and  in  July,  1819,  the  Bank 
note  was  again  at  par.  There  it  remained  thenceforward,  and 
from  that  day  to  this  there  has  been  no  depreciation  in  the 
value  of  Bank  of  England  paper.* 

In  the  mean  while,  however.  Parliament  had  taken  alarm. 
The  Bank  directors,  after  paying  out  £  4,000,000  in  redemp- 
tion of  their  notes  under  the  conditions  specified  in  1817,  see- 
ing no  immediate  prospect  of  a  rise  in  exchange,  and  fearful 
of  the  entire  exhaustion  of  their  treasure,  applied  to  Parlia- 
ment early  in  1819  to  be  relieved  from  the  further  perform- 
ance of  their  own  promises  of  redemption.  Committees  were 
appointed  by  both  Houses,  whose  first  act  was  to  renew  the 
Restriction  in  its  whole  extent.  Then,  with  a  view  to  the  final 
establishment  of  a  fixed  government  policy  in  regai'd  to  re- 
sumption, the  two  committees  entered  into  a  separate  and 
most  extended  investigation  of  the  whole  subject,  resulting  in 
two  reports  made  in  the  course  of  April  and  Mav,  which,  witli 
the  accompanying  evidence,  fill  an  enormous  volume,  and  still 
furnish  a  mass  of  readable  matter  not  less  interesting  than 
bulky.     We  are  obliged  to  omit  any  detailed  examination  of 


*  Dank 

Circulation. 

Date. 

Totol. 

Notes  of 

Rink 

Price  of 

£5  and  up-.rards. 

Tro:isnre. 

Gold. 

1816 

29  Feljniary 

i:  27,013,620 

£  18,012,220 

.£4,040,880 

105 

31  August 

26,758,720 

17,661,510 

7,562,780 

101.5 

1617 

28  Felirunn' 

27,397,900 

19,261,630 

9,6f:0,970 

100.8 

80  August 

29,543,780 

21,550,630 

11,668.260 

103 

1818, 

28  Februiiry 

27,770,970 

20,370,290 

10,055,460 

104.5 

81  August 

26,202,150 

18,676,220 

0,363,160 

104.5 

1819, 

27  Fcbrtmiy 

25,126,700 

17,772,470 

4,184.020 

104 

31  August 

25,252,090 

18,017,460 

8,595,360 

100 

1820, 

29  Fel)n»iiry 

2.3.4?4,110 

10,794,960 

4,911,050 

100 

31  August 

24,29(),.'540 

17,600,7.30 

8,211,080 

100 

1821, 

28  Februnry 

2.3,884,920 

17,447,360 

11,869,900 

100 

31  .August 

20,295.-300 

17,747,070 

11,23.3,690 

100 

1822, 

28  February 

18,605,350 

17,290,600 

11,057,150 

100 

81  August 

17,404,790 

16,000,460 

10,097,900 

100 

Average  Circulation  of  Bank  Notes  of  jE  6  and  upwards  for  the  years 
1828.  1824.  1825. 

jC  18,033,636  JC  19,927,120  jC  19,679,120 


THE  BANK  OF  ENGLAND  RESTRICTION.       263 

tliese  papers,  and  of  the  Parliamentary  debates  that  followed 
them  ;  but  it  is  impossible  to  close  this  history  without  some 
slight  analysis  of  the  measures  finally  adopted. 

Mr.  Peel,  afterwards  the  celebrated  Prime  Minister,  was 
chaii-man  of  the  House  committee.  Hitherto  an  opponent  of 
the  bullionists,  his  opinions  were  changed  by  the  testimony 
offered  before  his  committee,  and  he  became  a  convert  to  the 
doctrines  which  Mr.  Homer  and  his  friends  had  so  ably  advo- 
cated in  1810.  He  carried  almost  his  whole  party  with  him. 
It  was  now  generally  acknowledged  in  Parliament  that  Bank 
paper  was  depreciated  in  regard  to  gold,  and  that  a  forcible 
contraction  would  restore  the  eciuilibrium.  This  principle, 
therefore,  lay  at  the  basis  of  his  report. 

The  most  serious  resistance  to  resumption  now  came,  how- 
ever, from  a  new  party,  which  made  an  alarmmg  nse  of  this 
doctrine  of  depreciation.  It  was  affirmed,  and  probably  with 
truth,  that  the  trifling  difference  between  paper  and  gold  was 
no  measure  of  the  actual  depreciation  in  paper  as  compared 
with  commodities  generally.  The  rise  in  prices  during  the  war 
had  been,  it  was  argued,  as  much  as  fifty  or  one  hundred  per 
cent  upon  the  old  scale.  A  return  to  the  original  standard 
would  be  a  flagi'ant  injustice  to  the  community.  The  fund- 
holders  alone  would  be  benefited  by  it,  and  the  people  would 
be  ground  down  by  additional  taxes  solely  in  order  to  pamper 
the  wealthy  capitalist.  If  Parliament  were  determined  to  re- 
store specie  payments,  it  should  at  least  create  a  new  standard, 
and  reduce  the  value  of  sterling  money  by  twenty-five  per 
cent ;  or  it  should  accompany  the  resumption  by  allowing  an 
equivalent  deduction  to  every  debtor  on  the  amount  of  his 
debt.  In  other  words,  a  general  repudiation  to  the  extent  of 
twenty-five  per  cent  was  demanded  by  a  part}^  which  contained 
some  leading  and  influential  members  of  Parliament  not  in  any 
way  inclined  to  act  the  part  of  demagogues. 

The  House  of  Commons  was,  however,  faithful  to  one  main 
principle,  in  which  it  justly  considered  the  national  honor  to  be 
involved.  The  Restriction  had  been  a  war  measure  merely. 
Since  peace  had  been  restored,  Parliament,  while  consenting 


264  THE   BANK   OF   ENGLAND   RESTRICTION. 

to  renew  the  law  from  year  to  year,  had  repeatedly  pledged  it- 
self to  ultimate  resumption.  Ever}-  government  loan  had  been 
i*aised  on  the  faith  of  these  pledges ;  the  interest  of  the  na- 
tional debt  had  been  paid  in  paper,  on  the  ground  of  its  equiv- 
alence to  gold  ;  every  public  or  private  debt  since  1797  had 
been  contracted  under  the  influence  of  acts  of  Parliament 
prescribing  the  time  of  resumption  ;  every  Bank  note  bore  a 
promise  to  pay  upon  its  face.  Four  years  had  already  been 
allowed  to  pass,  and  nothing  had  yet  been  done.  It  was  felt 
that  any  further  concession  either  to  public  timidity  or  to  class 
interests  would  endanger  the  national  credit,  if  hideed  it  did 
not  proclaim  a  criminal  dishonesty  in  those  to  whom  the 
duties  of  legislation  were  intrusted. 

All  resistance,  therefore,  to  the  principle  of  resumption  in 
its  purest  and  simplest  form  was  summarily  swept  aside.  Yet 
it  is  curious  to  observe  with  what  excessive  caution  Mr.  Peel 
proceeded,  and  how  clumsy  and  ponderous  an  engine  he  thought 
it  necessary  to  invent  in  order  to  bring  about  a  very  simple 
result.  At  the  time  when  his  committee  was  sitting,  there 
was  a  premium  of  about  five  per  cent  upon  gold,  and  his  object 
was  to  restore  fully  the  equilibrium  between  paper  and  coin  in 
the  first  place,  and  in  the  second  to  create  a  system  under 
which  it  should  be  impossible  for  paper  to  foil  again  below  par. 
The  latter  purpose  could,  as  he  believed,  be  effected  by  estab- 
lishing the  principle  that  the  circulation  should  be  forcibly 
contracted  as  the  exchanges  became  unfavorable,  or,  in  other 
words,  that  the  Bank  should  diminish  its  issues  whenever  its 
treasure  was  diminished.  But  as  the  Bank  directors  were  ob- 
stinate in  denying  the  efficacy  of  this  contrivance,  Mr.  Peel 
tmdertook  to  frame  his  bill  in  such  a  manner  as  to  leave  them 
no  option  but  to  follow  out  his  theory. 

The  project,  therefore,  began  by  an  order  for  the  repayment 
by  the  government  of  ten  millions  out  of  the  twenty-three 
millions  advanced  to  it  l)y  the  Bank.  This  repayment  was  not 
made,  however,  for  the  pm-pose  of  necessarily  contracting  the 
Bank  loans  or  issties,  biit  because  the  Bank  could  more  easily 
control  its  circulation  when  made  in  short  private  loans,  than 


THE  BANK  OF  ENGLAND  RESTRICTION.       265 

when  made  in  more  permanent  advances  to  government,  and 
would,  therefore,  be  moi'e  able  to  act  energetically  should  a 
fall  in  the  exchanges  threaten  the  success  of  the  plan. 

Having  thus  removed  one  possible  impediment,  Mr.  Peel's 
next  step  was  to  move  the  following  resolution  :  "  That  from 
the  1st  of  February,  1820,  the  Bank  shall  be  liable  to  deliver 
on  demand  gold  of  standard  fineness,  having  been  assayed  and 
stamped  at  his  Majesty's  mint,  a  quantity  of  not  less  than 
sixty  ounces  being  required  in  exchange  for  such  an  amount 
of  notes  by  the  Bank  as  shall  be  equal  to  the  value  of  the 
gold  so  required,  at  the  rate  of  £4  Is.  per  ounce  "  ;  that  is  to 
say,  an}'  person  presenting  Bank  notes  to  the  amount  of  £  243 
at  the  Bank  counter  should  receive  in  return  a  bar  of  gold 
worth  £233.  After  the  1st  of  October  he  was  to  pay  only 
£238  for  the  same  quantity  of  gold,  and  after  the  1st  of  May, 
1821,  the  ingot  of  sixty  ounces  was  to  be  purchasable  at  its 
par  value  in  notes.  After  this  experiment  had  been  fully  tried 
during  a  space  of  two  years,  the  Bank  was,  on  the  1st  of  May, 
1823,  to  commence  the  redemption  of  its  notes  in  coin. 

Such  was  the  famous  bill  of  Mr.  Peel,  which  excited  the 
wannest  controversies  during  a  whole  generation.  So  far  as 
its  ultimate  purpose  of  effecting  an  unconditional  return  to 
specie  payments  is  concerned,  it  deserves  all  praise  ;  but  we 
cannot  think  that  the  merits  of  Mr.  Peel's  bill,  as  a  practical 
measure,  were  very  great,  or  that,  apart  from  its  general  ten- 
dency, it  either  did  or  could  exercise  any  great  influence  on 
the  result.  A  simple  resolution  requiring  the  Bank  to  resume 
on  a  certain  day  would  have  answered  the  purpose  better. 

In  the  first  place,  the  elaborate  mechanism  by  which  the 
price  of  gold  was  to  be  forced  down  was  based  upon  an  official 
acknowledgment  of  depreciation,  the  Bank  note  being  made 
the  legal  equivalent  of  a  smaller  sum  in  gold  than  that  named 
upon  its  face.  It  is  true  that  no  actual  coin  was  to  pass,  but 
the  gold  ingots  were  as  much  coin  as  if  they  had  been  guineas. 
To  reverse  the  whole  i)()licy  of  the  war,  and  at  this  late  mo- 
ment to  proclaim  that  the  government  had  for  years  steadily 
cheated  its  creditors  by  jjaying  them  in  depreciated  paper,  was 
unnecessary,  and,  as  we  believe,  wrong  in  principle. 


266  THE   BANK   OF   ENGLAND   RESTRICTION. 

In  the  second  place,  the  radical  difficulty  with  Peel's  bill 
was,  that  if  its  provisions  had  been  tested,  —  had  the  event 
occun'ed  which  they  were  designed  to  provide  for,  —  they 
would  probably  have  proved  useless.  We  have  no  space  to 
enter  on  the  wide  controversy  still  raging  in  England  on  this 
point  as  connected  with  Sir  Robert  Peel's  Bank  Charter  Act 
of  1844  ;  but  there  are  few  admirers  of  that  act  who  can  deny 
that  the  theory  of  regulating  the  currency  by  the  movements 
of  exchange  does  not  and  cannot  exclude  very  violent  fluctua- 
tions in  credit,  —  in  fact,  that  it  for  the  time  aggravates  them. 
Had  the  exchanges,  therefore,  become  unfavorable  in  1820,  as 
they  did  in  1825,  no  amount  of  contraction  could  have  saved 
the  specie  of  the  Bank.  If,  therefore,  in  the  face  of  such  a 
drain,  the  Bank  had  undertaken  to  increase  it  by  selling  gold 
two  per  cent  cheaper  than  before,  as  Peel's  act  required,  there 
is  every  reason  to  believe  that  it  would  have  again  broken 
down. 

As  Mr.  Ricardo  pointed  out  to  Parliament,  its  duty  was  to 
establish  the  principle,  but  it  was  for  the  Bank  to  carry  that 
principle  out  in  action.  Mr.  Peel's  act  was  not  merely  for  the 
resumption  of  specie  payments  ;  it  was  also  one  for  the  regula- 
tion of  commerce  and  credit ;  it  undertook  to  control  both  the 
currency  and  the  exchanges.  Such  efforts  have  hitherto  al- 
ways failed,  and  we  can  see  no  reason  for  supposing  that  this 
one  would  have  been  more  successful  than  the  rest.  The 
really  valuable  part  of  the  bill  was  that  wliich  fixed  a  day  for 
the  resumption,  and  that  which  repealed  the  penal  statutes 
against  melting  or  ex^wrting  coin.  Had  all  the  rest  been 
omitted,  the  measure  would  have  been  greatly  improved. 

Whatever  may  have  been  the  theoretical  merits  or  demerits 
of  the  scheme,  in  actual  practice  it  was  wholly  inoperative. 
Within  a  few  months  of  its  adoption,  and  without  any  opera- 
tion upon  the  currency,  gold  again  fell  to  par,  and  there  it  has 
since  remained.  Tlie  Bank  j)rcpared  its  bars  of  bullion,  but  no 
one  would  have  them.  On  the  contrary,  large  amounts  of  gold 
were  brought  into  its  vaults.  Weary  of  prolonging  an  ob- 
viously useless  delay,  the  directors  applied  to  Parliament  early 


THE   BANK   OF   ENGLAND   RESTRICTION.  267 

in  1821,  and  procin-ed  the  passage  of  a  new  act,  under  which 
cash  payments  were  at  lengtii  entirely  resumed  on  the  1st  of 
May  of  that  year.  The  public  was  unconscious  of  the  event. 
The  Bank  system  was  not  altered,  nor  was  the  circulation 
diminished,  except  so  far  as  sovereigns  were  substituted  for 
notes  of  one  and  two  pounds ;  and  after  twenty -four  years  of 
an  irredeemable  paper  currency,  Great  Britain  returned  smooth- 
ly and  easily  to  its  ancient  standai'd,  and  redeemed  its  pledged 
honor. 

There  was,  however,  between  the  years  1818  and  1822,  a 
general  and  severe  fall  in  prices,  which  was  then,  and  is  still, 
commonly  referred  to  the  action  of  Mr.  Peel's  bill.  There 
may  be  a  certain  degree  of  truth  in  this  theory,  since  the  cer- 
tainty of  resumption  would  very  possibly  inspire  for  the  time 
a  salutary  cautiousness  in  the  extension  of  general  credit. 
But  in  truth  there  were  other  causes  which  tended  much  more 
strongly  to  produce  the  same  result.  The  agricultural  class, 
which  uttered  the  loudest  complaints,  had,  under  the  influence 
of  an  excessive  stimulus,  brought  more  land  under  cultivation 
than  was  required  by  the  public  wants,  and  a  long  time  passed 
before  a  proper  equilibrimn  was  again  established.  The  ship- 
ping interest  was  in  much  the  same  condition.  But  the  popu- 
lation at  large  did  not  suffer.  On  the  contrary,  it  does  not 
admit  of  doubt  that  the  condition  of  the  mass  of  Englishmen 
steadily  improved  after  1817.  At  the  very  time  when  prices 
were  falling,  the  manufacturing  interests  were  rapidly  extend- 
ing and  enriching  themselves  ;  we  hear  less  and  less  of  politi- 
cal discontent  and  internal  disorder,  as  reviving  prosperity 
brought  with  it  social  repose,  while  even  among  the  bankers 
and  traders  there  were  far  fewer  bankruptcies  during  the  three 
years  ending  in  1821  than  in  any  similar  period  since  1809. 
If  the  resumption  was  to  be  held  responsible  for  the  misfor- 
tunes of  certain  branches  of  industry,  common  justice  requires 
that  the  general  prosperity  of  others  should  outweigh  the 
complaint ;  but  if  the  views  which  we  have  taken  are  correct, 
both  co'nplaint  and  praise  were  equally  thrown  away,  and  the 
system  after  resumption  was  identical  with  that  which  had 


268  THK   13ANK    OF   ENGLAND   RESTRICTION. 

existed  before.  The  only  effect  of  the  long  suspension  was  to 
breed  a  race  of  economists  who  attributed  an  entirely  undue 
degi'ee  of  power  to  mere  currency,  and  who  for  years  to  come 
delayed  a  larger  and  more  philosophical  study  of  the  subject, 
by  their  futile  experiments  upon  paper  money. 

We  will  not  undertake  to  apply  England's  experience  to  oth- 
er cases  of  depreciation,  though  no  richer  field  could  be  wished. 
But  we  reiterate,  in  concluding  this  review,  that  a  wide  distinc- 
tion must  be  drawn  between  inconvertible  bank-notes,  issued 
on  good  security  merely  as  loans,  payable  within  a  short  defi- 
nite period,  and  inconvertible  government  paper,  issued  like  so 
much  gold  or  silver,  yet  not  capable  of  being  melted  like  the 
precious  metals  into  an  article  of  commerce,  nor  of  being  re- 
turned to  the  issuer  and  not  again  borrowed,  like  bank-notes. 
In  one  case  the  public  regulates  the  supply  by  its  own  wants  ; 
in  the  other,  it  is  compelled  to  regulate  prices  by  the  supply. 
No  country  laboring  under  the  latter  difficulty  can  draw  con- 
solation from  England's  example,  lint  if,  in  addition  to  the 
£  00,000,000  which  we  will  suppose  to  have  circulated  in 
British  paper  during  the  last  ten  years  of  Restriction,  there 
had  been  another  £  60,000,000  of  government  currency  forced 
upon  the  public,  and  if  the  private  banks  of  issue  had  been 
under  a  less  rigorous  central  control,  in  this  case  there  might 
indeed  be  some  parallel  l)ctween  the  difficulties  of  resumption 
in  1821  and  those  under  which  other  nations  have  been 
weighed  down.  But  in  this  case,  t<x),  wc  may  freely  venture 
to  di8l)elievc  that  the  return  to  cash  payments  on  the  old  sys- 
tem would  have  been  so  easily  brought  about ;  and  if  England 
had,  after  all,  succeeded  in  ultimately  restoring  licr  credit,  if 
she  had  redeemed  her  pledges  and  vindicated  her  honor,  slio 
would  have  accomplished  more  than  any  nation  has  yet  done, 
although  many  have  been  placed  in  a  similar  situation. 


BRITISH  FINANCE  IN  1816.^ 


LORD  LIVERPOOL'S  administration,  at  the  close  of  the 
great  French  war,  contained  perhaps  not  a  single  mem- 
ber endowed  with  less  originating  power  than  Mr.  Vansittart, 
the  Chancellor  of  the  Excheqner.  The  twenty- three  years 
during  which  that  straggle  had  raged  almost  without  inter- 
mission had  seen  many  men  in  succession  attempting,  after 
their  own  fashion,  to  sustain  the  enormous  and  rapidly  in- 
creasing burden  under  which  the  resources  of  England  were 
strained  to  exhaustion.  Mr.  Pitt,  who,  in  spite  of  all  that  may 
be  said,  was  great  as  a  finance  minister,  even  in  his  errors,  Mr. 
Addington,  Lord  Henry  Petty,  and  Mr.  Spencer  Perceval  had, 
one  after  another,  tried  their  ingenuity,  not  in  restoring  order 
to  the  finances,  for  they  all  found  any  such  purpose  far  beyond 
their  powers,  but  in  holding  England  back  from  the  brink  of 
national  bankruptcy.  When,  in  1812,  Mr.  Perceval  was  assas- 
sinated, and  Lord  Liverpool  became  the  First  Lc>rd  of  the  Treas- 
ury, it  was  not  supposed  that  so  weak  an  administration  could 
long  sustain  the  weight  of  the  public  interests ;  and  Mr.  Van- 
sittart seems  to  have  been  placed  at  the  head  of  the  Excheq- 
uer rather  in  the  expectation  that  the  position  would  not  be 
])ermanent,  than  with  any  idea  that  he  might  become  the  most 
important  member  of  the  government.  Nominally,  indeed, 
the  financial  policy  of  the  country  was  xuider  the  control  of 
the  Prime  Minister,  and  the  whole  a/lministration  was  respon- 
sible for  its  direction.     But  Lord  Liveqwol  was  himself  not  a 

*  From  the  Nortli  American  Review  for  April,  1867. 


270  BRITISH   FINANCE   IN   1816. 

great  man,  and  Lord  Castlereagh,  whose  ability  was  really  con- 
siderable, gave,  as  could  scarcely  have  been  otherwise,  his 
whole  attention  to  his  own  department  of  foreign  affairs.  Nev- 
ertheless, weak  as  it  was  in  1812,  this  administration  brought 
the  war  to  its  conclusion,  placing  Great  Britain  in  a  position 
more  powerful  and  commanding  than  she  ever  had  held  before, 
or  probably  will  ever  hold  again.  But  the  close  of  this  long 
struggle,  and  the  settlement  at  last  effected  by  the  treaty  of 
Vienna,  .changed  with  great  rapidity  the  task  of  the  English 
government.  Questions  of  internal  policy  sprang  into  sur- 
passing interest  and  prominence  ;  and  while  Lord  Liverpool 
and  Lord  Castlereagh  were  still  occupied  in  maintaining  British 
influence  on  the  Continent  at  the  same  point  to  which  they 
had  raised  it  in  1815,  the  movement  had  already  begun  among 
the  people,  which,  fifty  years  later,  ended  in  the  official  avowal 
of  the  uselessness  and  mischief  of  the  traditional  foreign 
policy  of  Great  Britain. 

Mr.  Vansittart  was  not  a  person  of  so  much  consequence 
that  it  has  been  thought  worth  while  to  publish  liis  papers  ; 
and  we  cannot  now  learn  whether  he  was  in  any  way  conscious 
of  «the  enormous  duties  which  the  close  of  the  war  threw  upon 
him,  —  duties  which  would  have  overtasked  Pitt  himself,  and 
which  Huskisson  and  Peel  made  the  foundation  of  their  great 
reputations,  while  a  host  of  inferior  men  were  buried  under 
the  weight.  Even  now  it  is  impossible  to  draw  up  a  clear 
statement  of  the  condition  of  English  finances  in  181 G.  It  is 
impossible  to  determine  with  certainty  even  the  simplest  of  all 
the  facts,  —  the  amount  of  the  debt.  If,  therefore,  the  follow- 
ing account  of  English  financial  affairs  appears  unintelligible 
to  the  reader,  there  is  only  one  consideration  to  be  offered  in 
its  excuse.  This  account  is  difficult  to  understand,  and  may 
contain  errors ;  but  there  can  be  no  possible  doubt  that  a  clear 
and  positive  statement  would  bo  quite  unworthy  of  belief. 

The  Parliamentary  Paper  No.  443  of  the  session  of  1858 
gives  an  official  i-eturn  of  the  amount  of  the  public  debt  of 
the  United  Kingdom  for  cvciy  year  since  that  debt  has  had 
an  existence.     There  is  excellent  reason  to  doubt  whether  the 


BRITISH   FINANCE   IN   181G. 


271 


sums  given  are  in  the  majority  of  cases  more  than  approxima- 
tions to  the  truth ;  but  there  seems  to  be  no  reason  to  expect 
greater  exactness  from  any  otlier  source.  The  following  may, 
therefore,  be  assumed  as  a  fair  statement  of  the  national  debt 
of  Great  Britain  in  181 G,  the  first  year  after  the  return  of 
peace. 


Funded  Debt. 
Rank  of  Kiislaml,  at  3%  .     . 

Bank  of  Ireland,  at  5% 

South  Sea  Comiiuny,  at  3%      .     .     .     . 

Five  per  cent  Annuities 

Four  per  cent  Annuities 

Three  and  half  per  cents 

Three  per  cent  Reduced  Aniuiities    .     . 
Three  per  cent  Consolidated  Annuities 
Three  per  cent  Consolidated  Annuities 

(Germany) 

Three  per  cent  Consolidated  Annuities 

(Portugal) 

Bank  Aiumities  (172G),  at  3%  .     .     .     . 
Total    .    .     . 

Unfun'led  Debt. 

Kxchequer  Bills 

Treasury  Bills  (Ireland) 

Debentures 

Total    .    .     . 

Grand  Total    .    .    . 


Great 
Britain. 


11,686,800 

14,814,085 

136,181,688 

74,935,719 

164,701,456 
382,447,774 

5,731,192 

534,712 

1,000,000 


Ireland.    !        Total. 


11,686,800 

2,169,231   2,109,231 

14,814,085 

10,579,485  146,761,173 

789,785  75,725,504 

10,740,014 


10,740,014 
164,701,456 
382,447,774 

5,731,192 

534,712 

_2.f>'>'^,ooo 

792,033,426  24,278,515,816,'3ir,94l 


41,441,900 
787,400 


42,229,300 


834,262,726 


2,497,808 


2,497,808 


41,441,900 

2,497,808 

787,400 

44,727,108 


26,776,323  861,039,049 


The  nominal  capital  was,  therefore,  about  eight  hundred  and 
sixty  million  pounds  ;  and  in  January,  1816,  six  months  after 
Waterloo,  the  three  per  cents  stood  at  sixty  in  the  market.  It 
must,  however,  be  stated  at  the  outset,  and  always  borne  in 
mind,  that  the  funded  debt  of  Great  Britain  cannot  be  rightly 
represented  by  a  statement  of  the  nominiU  amount  of  capital 
supposed  to  be  involved.  One  nation  borrows  money,  and,  by 
the  terms  of  the  contract,  engages  to  repay  the  whole  sum 
lent,  and  fixes  a  time  for  the  repayment.  Another  nation  bor- 
rows Avithout  the  profession  of  any  intention  ever  to  return  the 
capital  at  all ;  and  Great  Britain's  whole  funded  debt  was  con- 
tracted in  this  manner.     In  technical  language,  the  govern- 


272  BRITISH   FINANCE   IN   I81G. 

ment  sells  annuities,  and  no  purchaser  is  either  in  law  or  in 
equity  entitled  to  demand  more  than  his  stipulated  annual 
interest  upon  the  sum  which  he  has  lent.  No  man  can  ever 
claim  of  right  any  part  of  the  principal  of  the  public  funds. 
It  is  true,  however,  that  there  are  two  sorts  of  annuities, 
which  must  be  clearly  distinguished.  The  perpetual  annuities, 
to  which  class  the  mass  of  the  funds  belong,  are  also  called 
redeemable,  because,  whenever  they  rise  above  par  in  the 
market,  and  it  becomes  profitable  to  pay  them  off  by  borrow- 
ing the  money  at  a  lower  rate  of  interest,  there  is  nothing  in 
the  contract  which  forbids  the  operation  ;  and  accordingly  this 
has  been  regularly  done,  until  the  whole  debt  is  now  consoli- 
dated in  three  per  cents,  and  may  at  any  time  be  reduced  still 
lower,  should  these  rise  above  par.  But  the  terminable  annu- 
ities are  not  redeemable,  and  depend  on  an  entirely  different 
principle. 

These  terminable  annuities  are  of  two  kinds,  —  those  for 
lives  and  those  for  a  term  of  years.  They  bear  a  nighcr  rate 
of  interest,  calculated  according  to  special  tables,  so  that  the 
life  annuities  terminate  absolutely  with  the  life  of  the  holder, 
and  the  others  at  some  fixed  time,  according  to  the  specified 
terms  of  the  contract.  The  so-called  long  annuities,  for  in- 
stance, were  fixed  to  terminate  in  18G0.  This  system  of 
terminable  annuities  has,  therefore,  the  advantage  of  securing 
the  extinction  of  the  loan  at  a  very  moderate  annual  charge, 
so  that  the  tax-payers  are  unconscious  that  they  are  in  fact 
paying  off  every  year  a  portion  of  the  capital,  as  well  as  the 
interest  of  the  debt.  This  was  at  one  time  a  fiivorite  scheme 
in  English  finance,  and  there  were  several  forma  of  tenuiuiible 
annuities,  the  principle  of  the  self-extinguishing  character  of 
Ihc  debt  remaining  the  same  througliout.  Although  this  plan 
of  borrowing  is  accompanied  by  a  higher  rate  of  annual  charge 
than  is  necessary  when  borrowing  on  a  perpetual  annuity,  it 
wiw  usually  made  very  light  by  granting  the  aimuity  for  a  long 
term  of  years.  Thus,  an  annuity  for  a  hundred  years -is  the 
same  thing  to  most  persons  as  an  annuity  forever;  and  it  is 
also  nearly  the  same  by  calculation,  its  value  at  four  per  cent 
being  twenty-fovir  and  a  half  years'  purchase,  and  therefore 


HRITISII   FINANCE   IN   181(3. 


273 


only  a  half-year's  purchase  less  than  an  annuity  forever.  It 
has  been  contended  that  the  whole  debt  ought  to  have  been 
contracted  in  this  form,  and  possibly,  if  the  government  had 
begmi  with  this  purpose  in  its  mind,  it  might  have  succeeded ; 
but  in  practice  the  public  naturally  prefer,  where  the  choice  is 
given  them,  the  perpetual  investment.  These  terminable  an- 
nuities were  also  objected  to,  reasonably  or  not,  on  the  ground 
that  they  encouraged  the  popular  tendency  to  improvidence. 

The  unfunded  debt,  too,  is  not  fairly  represented  as  capital. 
Exchequer  bills  were  habitually  used  to  some  extent,  in  antici- 
pation of  revenue  that  could  not  be  immediately  collected. 
Far  the  larger  portion,  however,  was  really  so  much  debt, 
which  had  to  be  ultimately  paid  off  or  funded.  Large  sums 
were  usually  voted  upon  these  bills  towards  the  conclusion  of 
each  session  of  Parliament,  particularly  in  time  of  war,  to 
answer  exigencies  of  the  public  service. 

It  is,  therefore,  the  charge  of  the  debt  alone  which  is  the 
true  measure  of  the  liabilities  of  Great  Britain.  The  same 
authority  which  has  been  already  quoted  states  this  charge  to 
have  been,  in  1816,  as  follows  :  — 


Great 
Britain. 

Ireland. 

Total. 

Funded  Debt. 

Interest  on  Capital 

Long  Annuities 

Short  Annuities 

£ 
27,233,994 

£ 
1,044,928 

£ 

28,278,922 

1,359,436 

230,000 

199,845 

16,731 

88,601 

1,894,613 

1,359,436 
230,000 
199,845 

43,677 

16.731 
44,924 
61^655 

Bank  Annuity 

Exchequer  Annuities 

Total     .     .     . 

Interest  of  Stock  for  Redemption  of  Land 
Tax 

1,832,958 

3,815 
284,674 

3.815 
284.674 

Management 

Total    .     .     . 

Unfunded  Debt. 

Exchequer  Bills  (Interest)   .              .     . 

Debentures  (Interest) 

Exchequer  Bills  issued  in  anticipation  of 
Taxes  (Interest) 

Total    .     .     . 
Grand  Total    .     .     . 

29,-355,441 

1,106,583 

30,462,024 

2.096.589 
39,370 

47,635 

1,971,699 
39,370 

47,635 
2.058,704 

124,890 
12478^0 

2,183,594 

31,414,145 

1,231,473 

32,645,618 

274  BRITISH   FINANCE   IN    18H). 

We  may  begin,  therefore,  with  the .  assumption,  that  the 
capital  of  the  national  debt  amounted,  in  181G,  to  the  sum 
of  £861,040,000,  bearing  an  annual  burden  of  X  32,045,618. 

The  regular  annual  expenses  of  the  government  amomited 
to  nearly  the  same  sum  as  the  charge  of  the  debt.  The  whole 
amovmt  "required  to  be  raised  by  taxation,  in  the  year  subse- 
quent to  the  war,  was  about  £61,000,000.  Many  years  after- 
wards, when  the  popular  cry  for  economy  had  exercised  its  full 
power,  and  circumstances  had  allowed  a  considerable  reduction 
to  be  eflFected  in  the  charge  for, interest  of  the  debt,  the  annual 
expenditure  of  the  country  sank  so  low  as  £47,000,000;  but 
the  first  peace  budget  was  one  of  more  than  sixty  millions 
sterling. 

This  immense  burden  was  levied  on  a  population  which 
probably  did  not  exceed  twenty  million  souls;  and  of  this 
number  fully  six  millions  were  Irish.  But  Ireland  was  bank- 
rupt. So  bad  was  her  financial  condition,  that,  after  every 
effort,  she  found  herself  unable  to  meet  by  taxation  even  the 
charge  of  her  debt.  That  charge  amounted,  in  1815,  to 
£  6,370,000 ;  while  the  net  revenue  paid  into  the  Irish  ex- 
chequer was  little  more  than  £5,000,000.  It  was  not  to 
Ireland  that  the  people  of  Great  Britain  could  look  for  the 
faintest  assistance  in  the  support  of  their  common  credit . 

There  remained  a  population  of  fourteen  millions  in  England, 
Scotland,  and  Wales,  and  of  this  number  it  is  hardly  rash  to 
say  that  one  half  contributed  little  to  the  payment  of  taxes. 
Tlie  warehouses  were  choked  with  goods,  for  which  no  market 
was  to  be  found.  The  price  of  grain  had  fallen  from  five  and 
six  pounds  sterling  the  quarter  down  to  two  pounds  and  a  half, 
bringing  distress  to  every  farmer  in  the  kingdom.  More  than 
£6,000,000  were  annually  raised,  by  local  taxation,  for  the 
support  or  relief  of  the  poor  in  England  and  Wales  alone.  Un- 
der these  circumstances,  it  seems  a  liberal  allowance  to  8Ui)pose 
that  the  whole  weight  of  an  annual  taxation  of  £  60,000,000 
fell  practically  upon  not  more  than  ten  millions  of  people  ;  and 
from  these,  in  1815,  the  government  had  actually  snccecled 
in  grinding  £  72,000,000.     But  even  allowing  that  the  whole 


BRITISH   FINANGK   IN   1816.  275 

fourteen  millions  contributed  in  just  proportion,  the  burden 
of  taxation  is  terrible  to  consider,  when  the  vast  mass  of  pov- 
erty and  pauperism  is  taken  into  the  account. 

The  income  returns  of  Great  Britain  for  the  year  1815  give 
the  following  result :  — 

Customs      .......     £10,487,522 

Excise      .......    26,562,432 

Property  Tax 14,318,572 

Assessed  Taxes 6,214,987 

Land  Tax 1,079,993 

Stamps     .         .         .         .         .        .        .      5,865,413 

Post-Office 1,548,000 

Miscellaneous 366,867 


Total     .        .        .   £66,443,786 

To  this  total,  about  £  5,000,000  is  to  be  added  on  account 
of  Ireland,  which  still  had  an  exchequer,  and  even  a  currency, 
distinct  from  that  of  Great  Britain.  It  must  also  be  men- 
tioned, that  the  distinction  between  customs  and  excise  was 
merely  nominal,  and  did  not  nidicate  the  nature  of  the  taxes. 
The  transfers  from  one  to  the  other  head  seem  to  have  been 
arl)itrary  ;  and,  as  the  same  article  frequently  paid  both  an 
excise  and  a  customs  duty,  it  was  more  convenient  that  one 
board  should  collect  the  whole. 

More  than  half  the  revenue  was  produced  by  the  excise  and 
customs.  It  was,  therefore,  of  paramount  importance  that 
these  two  branches  should  be  carefully  fostered,  simplified,  and 
systematized.  When  Mr.  Pitt  assumed  the  control  of  the 
finances,  after  the  American  war  of  independence,  he  found 
the  customs  in  a  state  of  such  inextricable  confusion,  that  the 
most  experienced  merchants  were  unable  to  foresee  what  would 
be  the  amount  of  duty  afibcting  the  articles  they  were  import- 
ing, or  to  know  the  course  to  be  followed  in  entering  or  clear- 
ing their  vessels.  In  the  midst  of  a  chaos  of  contradictory 
statutes,  irreconcilable  systems,  and  arbitrary  regulations,  the 
inheritance  of  a  century  of  bad  government,  the  clerks  of  the 
custom-house  ruled  with   suprenie   authority  over  the  whole 


276  BRITISH  FINANCE   IN   ISIG. 

commerce  of  Great  Britain.  Among  the  measures  by  which 
Mr.  Pitt  gained  his  riglit  to  be  considered  the  greatest  of  Eng- 
lish administrators,  the  one  which  did  away  with  this  state  of 
things  was  by  no  means  the  least  in  value.  In  1787  he  suc- 
ceeded in  carrying  through  Parliament  an  act  abolishing  all 
the  existing  duties,  and  substituting  in  their  place  single  duties 
on  each  article,  according  to  a  regular  tariff,  which  was  still 
further  assisted  by  a  reform  in  the  method  of  transacting 
business  in  the  custom-house. 

But  the  new  system  had  scarcely  produced  all  its  beneficent 
results,  when  the  French  war  broke  out ;  and  for  twenty-tliree 
years  Parliament  piled  one  customs  law  upon  another,  until 
the  old  confusion  reigned  in  the  custom-house  as  absolutely  as 
ever  before.  The  same  article  paid  duty  repeatedly,  —  now  to 
the  customs,  now  to  the  excise.  The  laws  were  without  a  sys- 
tem, and  impossible  to  class  under  any  imaginable  plan.  There 
were  bounties  or  drawbacks  upon  half  the  articles  of  conunerce 
or  production.  Fees  were  multiplied  to  excess.  Five  hundred 
different  statutes  regulated  the  customs  alone.  A  complete 
and  vigorous  measure  was  urgently  required  for  the  consolida- 
tion of  the  customs  laws ;  and  the  example  of  Mr.  Pitt  made 
the  neglect  of  the  step  by  any  subsequent  government  all  the 
more  obvious  and  inexcusable. 

This,  however,  was  a  part  of  the  situation  which  lay  nearest 
the  light,  and  was  most  easily  reached.  It  concerned  only  the 
form  of  collecting  tl>e  taxes  ;  and  the  real  difficulties  of  the 
case  extended  throughout  the  whole  length  and  breadth  of  the 
system  of  taxation  itself.  There  seems  to  have  been  scarcely 
ft  fragment  of  the  English  revenue  laws  which  was  not  marked 
by  peculiar  faults  of  its  own,  besides  sharing  in  the  radical 
vices  that  lay  at  the  foundation  of  almost  all  of  them.  The 
principal  exceptions  which  modern  writers  appear  to  have  made 
in  this  sweeping  condemnation  of  the  old  system  are  those  of 
the  house  aiid  land  t^vxes,  and  the  property  or  income  tax,  as 
the  most  economical  and  the  most  just  tliat  existed.  But  these 
required  a  degree  of  reform  and  alteration  which  would  almost 
have  converted  them  into  new  taxes. 


BRITISH   FINANCE   IN   1816.  277 

It  is  unquestionable  that  the  nation,  apart  from  the  form 
of  its  burdens,  was  very  much  over-taxed.  The  most  ordinary 
and  necessary  articles  of  consumption  were  overloaded  with 
burdens.  The  case  of  the  salt  duties  was  a  notorious  example 
of  this  evil.  The  natural  cost  of  salt  was  less  than  eightpence 
the  bushel,  while  the  law  required  fifteen  shillings  on  each 
bushel,  raising  its  price  to  about  twenty-two  times  its  value. 
The  same  objection  ran  through  most  of  the  excise  duties. 
This  was,  however,  comparatively  a  simple  difficulty;  and 
although  it  needed  prompt  and  effective  correction,  no  very 
high  intellectual  power  was  required  to  arrive  at  the  remedy, 
so  long  as  the  question  of  protection  was  not  involved. 

But  it  w^as  rare  indeed  that  the  question  of  protection  could 
at  that  time  be  kept  out  of  any  projected  improvement  in 
English  taxation.  Protection  coiled  like  a  tangled  cord  aroimd 
and  over  and  through  every  portion  of  British  finance.  The 
reformers,  who,  with  no  enmity  to  the  long-established  princi- 
ple of  protecting  home  industry,  still  wished  to  relax  a  little 
here  and  there  the  strain  of  taxation,  which  was  tearing  the 
very  muscles  out  of  the  bodies  of  their  poorer  fellow-country- 
men, tugged  now  at  one  projecting  evil  of  the  vast  system, 
and  now  at  another  ;  but  wherever  they  came,  they  found  the 
whole  mass,  confused  and  chaotic  as  it  was,  bound  hard  and 
fast  in  the  inextricable  meshes  of  protection.  Some  alarmed 
interest  sprang  out  of  the  darkness  to  cry  shame,  and  to  excite 
popular  hatred  against  them  at  the  very  moment  when  they 
were  hoping  at  last  to  have  foiuid  a  chance  of  stirring  the 
phlegmatic  government  and  the  wretchedly  indifferent  Parlia- 
ment into  taking  a  step  which  could  by  no  possibility  harm 
any  living  creature. 

Everything  was  protected.  Every  petty  interest  of  the 
country  had  its  rag  of  protection,  —  not  merely  against  the 
genius  or  activity  or  superior  circumstances  of  a  foreign  rival, 
but  against  allied  branches  of  industry  at  home.  Tiles  com- 
plained if  slates  were  untaxed.  Wool  was  jealous  of  cotton. 
The  brain  of  the  Chancellor  of  the  Exchequer  was  racked  by 
hopeless  efforts  to  maintain  a  proper  equilibrium  between  home 


278  BRITISH   FINANCI-:   IX   ISIf). 

industries,  while  protecting  them  all  against  the  foreigner. 
The  irresistible  logic  of  the  principle  was  really  carried  out  to 
that  extent  from  which  tamer  modem  protectionists  shrink. 
One  part  of  the  United  Kingdom  was  protected  from  the  other. 
The  products  of  English  industry  were  protected  from  the 
rivalry  of  Ireland,  and  the  manufactures  and  produce  of  Ire- 
land were  only  admitted  under  suitable  precautions  into  Eng- 
land. It  is  true,  that  the  policy  was,  in  this  particular  case, 
pursued  with  somewhat  superfluous  energy,  since  not  only  were 
heavy  duties  exacted  for  the  protection  of  manufjictures  wliich 
actually  existed  in  Ireland,  but  also  for  that  of  some  which  did 
not  exist  at  all,  and  never  had  existed,  and  which  a  moderate 
degree  of  knowledge  of  the  subject  would  have  shown  never 
could  exist ;  so  that  the  Irish  people  enjoyed,  through  a  long 
series  of  years,  the  most  favorable  of  possible  opportunities  for 
observing  the  operation  of  a  thoroughly  efficient  protective 
system  of  their  own  choice. 

Nor  was  this  all.  Besides  the  protection  granted  to  each 
industry  against  its  neighbor,  besides  that  which  built  a  wall 
between  the  diflTercnt  states  of  the  same  empire,  and  besides 
that  which  guarded  them  all  against  the  foreigner,  the  British 
system  imdertook  to  })rotect  one  foreign  nation  from  another ; 
and  this  was  even  regarded  as  a  masterpiece  o(  statesmanship." 
A  brilliant  example  of  this  form  of  protection  was  furnished 
in  the  case  of  Portugal.  For  an  entire  century,  down  to  1831, 
the  British  people  were  condemned  to  drink  the  vintage  of 
Portugal,  in  order  to  protectjboth  countries  against  the  supe- 
rior attractions  of  French  wine. 

But  even  as  regarded  the  ordinary  and  almost  imiversally 
accepted  practice  of  protecting  home  industry  against  the  for- 
eigner, the  system  of  181 G  was  far  in  advance  of  the  mild  con- 
ceptions of  186G.  The  statesmen  of  that  day  shrank  from  no 
consequence  of  their  tlieory.  It  was  not  enough  to  lay  pro- 
tective duties  of  sixty  or  a  hundred  per  cent  on  rival  enter- 
prise. It  was  not  even  enough  to  tax  at  the  rate  of  fifty  per 
cent  as  a  manufactured  article  tlie  very  mmnmies  that  were 
imported  from  Egypt,  lest  tliey  should  interfere  with  the  Brit- 


BRITISH   FINANCE   IN    I8I().  279 

ish  product.  If  the  principle  was  good  at  all,  it  was  held  to 
be  good  to  the  extent  of  absolute  prohibition  ;  and  as,  on  the 
one  hand,  the  law  required  that  the  ICnglishman  who  had  been 
so  Txnlucky  as  to  die  could  only  go  to  his  grave  in  a  winding- 
sheet  of  British  woollen,  so  it  was  enacted,  that  any  man, 
duke  or  beggar,  who  might  be  suspected  of  wearing  or  pos- 
sessing even  a  silk  handkerchief  of  foreign  manufacture  was 
liable  to  have  it  taken  from  his  neck  or  his  pocket,  or  to  have 
his  house  entered  and  ransacked  from  garret  to  cellar.  There 
was  an  element  of  the  most  intolerable  tyranny  inherent  in 
the  very  nature  of  the  prohibitive  laws. 

It  might  be  supposed  that  difficulties  and  confusion  enough 
woidd  have  resulted  from  such  a  revenue  system.  But  in 
point  of  fact,  there  was  nothing  peculiarly  strange  or  remarka- 
ble in  it.  Similar  principles  lay  at  the  base  of  almost  every 
financial  theory  at  that  time,  and  the  countries  of  Europe,  and 
even  of  America,  accepted  them  as  their  rule  of  action.  It 
was  here  that  the  British  system  began  to  show  itself  in  its 
own  strength ;  but  it  was  only  when  the  colonial  and  naviga- 
tion laws  were  added  to  the  over-taxation  and  to  the  eccen- 
tricities of  ordinary  protection,  that  confusion  became ,  con- 
founded, and  absurdity  ran  riot  in  the  English  statute-book. 
The  principle  which  then  lay  at  the  bottom  of  the  colonial 
system  was,  that  the  colonies  existed  for  the  benefit  of  the 
mother  country ;  and  the  successful  protest  of  the  North 
American  Colonies,  in  their  war  of  independence,  had  not  yet 
succeeded  in  convincing  Great  Britain  of  the  radical  error  of 
this  theory.  No  ships  but  British  ships  could  enter  the  ports 
of  a  British  colony,  and  no  market  but  the  English  market 
was  open  to  the  colonists.  The  West  Indian  sugar-planter 
was  obliged  to  send  his  produce  to  England  for  sale.  He  might 
perhaps  have  gained  something  had  he  refined  it  before  ship- 
ment ;  but  the  British  refiner  would  have  suffered,  and  the 
British  mercantile  marine  must  have  the  benefit  of  the  bulkier 
freight.  In  return,  he  was  obliged  to  receive  only  British 
goods,  or  goods  which  had  passed  through  Great  Britain.  But 
the  West   Indian  colonies  were  dependent   upon  the  neai'er 


280  BKITISH   FINANCE   IN   181G. 

ports  of  the  United  States  for  many  of  the  very  necessaries 
of  life  ;  and  the  negroes  died  of  hunger  when  those  ports  were 
closed.  This  necessity  of  obtaining  food  was  alone  the  ca\tse 
of  a  slight  relaxation  in  the  law,  by  which  a  limited  trade  was 
permitted  in  certain  articles,  from  certain  ports,  by  a  certain 
class  of  vessels,  with  the  United  States.  On  the  other  hand, 
if  the  price  of  colonial  sugar  was  twice  or  more  than  twice 
that  of  the  foreign,  as  was  sometimes  the  case,  the  British 
public  was  required  to  pay  the  additional  tax  of  several  mil- 
lions sterling  annually  for  the  benefit  of  the  colonial  system. 

The  timber  trade  with  the  Canadian  colonies  was  a  still  more 
curious  example  of  British  protection  and  its  complications. 
It  was  undisputed  that  the  timber  of  Norway  was  not  only  the 
easiest  to  procure  and  the  cheapest,  Imt  also  much  the  best  in 
the  market.  But  the  interests  of  the  colonies  required  protec- 
tion, and  the  British  marine  was  accordingly  built  of  inferior 
material.  The  reformers  demanded  the  abolition  of  this  mis- 
chievous system,  and  called  upon  the  shipping  interest  to  join 
in  obtaining  its  repeal.  The  ship-owners  refused.  They  re- 
sisted desperately  every  attempt  to  reopen  the  Norway  timber 
trade ;  and  their  argument  was,  that,  as  the  naval  power  of 
Great  Britain  demanded  a  numerous  merchant  marine  as  its 
basis,  and  as  the  timber  trade  with  Canada  supplied  an  enor- 
mou.sly  bulky  freight,  and  required  long  and  frequent  voyages, 
it  would  be  a  violation  of  the  very  first  principles  of  liritish 
policy  to  allow  their  ships  to  be  built  of  the  best  timber,  'i'he 
liberal  members  of  Parliament,  irritated  at  this  extravagant 
taxation  of  the  nation  for  what  they  considered  a  gross  piece 
of  jobl)ing,  tried  to  reduce  the  argument  to  the  absurd,  and 
indignantly  declared  that  Parliament  had  better  at  oiice  enact 
by  law  that  the  Newcastle  colliers,  instead  of  bringing  their 
coal  direct  to  London,  should  sail  "  north  about "  to  their  mar- 
ket, and  make  a  preliminary  tour  around  the  United  Kingdom. 
Tlio  answer  to  the  attempted  sarcjism  was  quick  and  decisive. 
The  8hij>owner8  retorted,  without  hesitation,  that,  although  it 
miist  indeed  be  admitted  that  the  Newcastle  colliers  were 
allowed  by  law  to  choose  the  shoiiest  and  easiest  route  to 


BRITISH   FINANCE   IN    181G.  281 

Loudon,  still  it  was  not  to  be  supposed  that  even  here  the 
shipping  interests  had  been  overlooked.  The  laws  practically 
forbade  the  use  of  the  inland  and  cheapest  transit  from  the 
nearer  mines,  with  the  single  object  of  encouraging  and  de- 
veloping the  coastwise  shipping  in  the  interest  of  the  national 
marine. 

A  protective  system  so  logically  perfect,  so  rigid  in  its  obe- 
dience to  a  single  purpose,  so  universal  in  its  scope,  so  minute 
in  its  application,  contains  elements  almost  of  gi'andeur.  The 
ruling  class  of  England  appeared  in  it  as  the  masters  of  the 
world.  Around  them  and  in  harmony  with  them  stood  the 
English  nation.  The  colonies  existed  for  their  benefit.  Allied 
nations  were  made  use  of  for  their  purposes,  and  the  rest  of 
mankind  were  their  enemies.  It  is  literally  true,  that,  if  the 
British  Parliament  had  at  this  time  possessed  the  power  to 
protect  the  interests  of  the  people  of  the  United  Kingdom 
and  its  colonial  dependencies  by  causing  every  other  existing 
nation  to  be  annihilated  from  the  surface  of  the  earth,  an  en- 
actment to  that  effect  would  have  been  only  the  logical  se- 
quence of  its  whole  system  of  legislation. 

It  is  of  course  impossible  even  to  conjecture  what  was  the 
actual  cost  to  the  citizen  of  this  indirect  taxation.  But  there 
is  one  means  of  showing  how  grievously  it  pressed  upon  the 
public,  and  how  intolerable  it  would  have  beeu  if  the  power 
of  the  government  could  have  enforced  it. 

There  is  a  strange  law  of  finance,  which  has  fixed  a  limit  to 
indirect  taxation,  and  decreed  that,  where  the  line  is  passed,  a 
new  agent  shall  intervene  for  the  protection  of  a  misgoverned 
people  and  the  vindication  of  the  laws  of  statesmanship.  At 
a  certain  point,  the  smuggler  appears  and  resciies  the  nation 
from  its  burdens.  The  extent  to  which  smuggling  is  carried 
is,  therefore,  the  measure  of  bad  revenue  systems. 

In  England  in  1816  there  was  no  limit  to  the  activity  of  the 
smugglers.  From  Kent  to  Dorset  and  Devonshire,  the  whole 
line  of  the  coast  swarmed  with  them,  and  wherever  they  came 
the  symjxvthies  of  the  people  were  with  them.  Coast  guards 
were  multiplied  in  every  direction.    The  army  itself  was  em- 


282 


BRITISH   FINANCE   IN    ISJG. 


ployed  in  the  sennce  of  the  custom-house.  The  severity  of 
the  penalties  was  teirible  ;  yet  any  gentleman  in  London  could, 
at  ten  days'  or  a  fortnight's  notice,  obtain  any  prohibited  arti- 
cle from  the  Continent,  at  thirty  per  cent  advance  iipon  its 
cost  there.  Foreign  silks  were  prohibited ;  but,  in  spite  of  the 
prohibition,  they  were  to  be  seen  in  every  haberdasher's  shop 
in  England,  and  in  the  very  Houses  of  Parliament.  Mr.  Hume, 
the  well-known  member  for  Aberdeen,  when  arguing  once 
against  the  absurdity  of  those  protective  laws,  "  produced  his 
bandana  handkerchief  before  the  very  eyes  of  the  House,  and, 
having  triumphantly  imfurled  the  standard  of  smuggling,  blew 
his  nose  in  it,  and  deliberately  returned  it  to  his  pocket." 
The  only  vindication  of  the  offended  majesty  of  the  law  at- 
tempted by  the  Chancellor  of  the  Exchequer  consisted  in 
reminding  Mr.  Hume  that  any  member  of  the  House  had  an 
absolute  right  to  seize  that  bandana  handkerchief  and  export 
it  to  a  foreign  country.  "  Ui)on  every  information  laid  under 
this  prohibitive  law,"  said  Mr.  Huskisson  in  1826,  "the  chances 
are,  that  the  informer  and  the  constable  have  bandanas  round 
their  necks,  and  that  the  magistrate  who  hears  the  charge  has 
one  in  his  pocket."  Another  prohibited  article  was  Scotcli 
whiskey,  and  Mr.  Hume  took  again  the  occasion  to  inform  the 
House  that  he  had  at  that  moment  smuggled  Scotch  whiskey 
in  his  cellar,  and  he  defied  the  whole  power  of  the  government 
to  prevent  his  having  it. 

These  were,  however,  only  luxuries.  The  case  was  much 
worse  when  it  concerned  the  gi'cat  articles  of  consumption 
among  the  people.  Salt  paid  its  duty  of  two-and-twenty  times 
its  value  on  fifty  thousand  tons  annually ;  but  it  was  su[)- 
posed  that  twice  as  much  more  was  consumed  which  paid  no 
duty  at  all,  or  only  the  moderate  one  which  made  the  profit 
of  the  smijggler  or  the  thief.  Soap  was  smuggled  to  nearly 
as  great  an  extent  as  salt.  By  this  universal  evasion,  fraud, 
and  violence,  the  whole  national  character  was  perverted  and 
degraded. 

But  even  the  spectacle  in  England  was  a  harmless  comedy 
in  comparison  with  the  results  of  this  same  system  in  Ireland. 


BRITISH   FINANCE   IN   1816.  283 

If  armies  of  four  or  five  hundred  smugglers,  supported  by  the 
population,  fought  pitched  battles  with  the  coast  guard  and 
revenue  officers  on  the  chalk  downs  of  Sussex  and  Hampshire, 
and  were  not  always  defeated,  there  reigned  all  over  Ireland, 
from  Dublin  to  Kinsale,  a  state  of  actual  civil  war,  which  was 
waged  by  the  peasantry,  with  horrible  cruelty,  by  assassina- 
tions and  savage  deeds  of  violence  that  are  still  remembered 
with  vivid  force  in  that  unhappy  country,  and  which  were  met 
and  repressed,  so  far  as  force  could  repress  them,  by  equally 
exasperating  acts  of  legalized  cruelty  and  military  violence. 
Here  it  was  the  excessive  duty  on  spirit  that  was  intolerable  to 
the  population ;  and  yet  this  duty  was  but  five  shillings  and 
sixpence  on  the  gallon,  while  moi'e  than  twice  the  charge  was 
borne  in  England  without  serious  difficulty.  Financially,  the 
result  was,  that  about  three  million  gallons  paid  the  tax,  and 
about  seven  millions  were  distilled  and  consumed  in  defiance 
of  the  law.  Politically,  the  attempt  to  enforce  the  tax  re- 
sulted in  making  Ireland  more  than  ever  a  danger  and  disgrace 
to  Great  Britain. 

Such  were  some  of  the  results  of  over-taxation  and  of  an 
overstrained  protective  system.  It  is  obvious  that  the  very 
highest  and  most  statesmanlike  qualities  were  required  in  the 
government  that  was  to  attempt  the  task  of  reform.  But  it  is 
not  to  be  supposed  that  this  was  the  only  field  for  the  activity 
of  reformers  in  the  financial  affairs  of  the  country.  The  ope- 
ration of  the  taxes  on  the  welfare  of  the  people  is  only  one 
side  of  financial  science.  The  administrative  system  under 
which  the  revenue  is  collected  and  expended,  if  not  first  in 
actual  importance,  is  certainly  first  in  order  of  time  among 
financial  problems ;  for  it  is  useless-  to  expect  economy  and 
foresight  from  a  wasteful  and  blundering  treasury,  whose  errors 
ai-e  not  the  mere  mistakes  of  an  incompetent  chief,  but  are  the 
inevitable  result  of  false  principles. 

It  is  absolutely  impossible  to  furnish  anything  like  a  fair 
picture  of  the  sj'stem  under  which  the  finances  of  Great  Britain 
suffered  at  tht,  beginning  of  this  century.  The  student,  who 
has  labored  month  after  month  to  comprehend  it,  turns  away 


284  BRITISH   Fl^'ANCE   IN   18 IG. 

at  last  with  despair,  and  abandons  the  attempt  as  not  worth, 
even  if  successful,  a  tenth  part  of  the  mental  effort  that  is 
required  to  fathom  it.  There  was  no  beginning,  no  middle, 
and  no  end.  There  was  a  bottomless  ocean  of  accounts,  with- 
out a  system,  without  connection,  and  without  result.  There 
were  innumerable  departments  and  bureaus,  independent  of 
each  other,  and  accountable  to  no  one.  The  mysteries  of  the 
exchequer  were  portentous.  Few  Englishmen,  even  then,  had 
any  conception  what  functions  were  exercised  by  such  me- 
dicBval  creations  as  the  Department  of  the  Pells,  the  Pipe 
Office,  and  the  Tally  Court,  the  calm  abodes  of  happy  sine- 
em'ists,  whose  duties  of  inconceivable  clumsiness  had  long 
been  assumed  by  the  Bank  of  England  and  other  offices,  but 
who  were  still  permitted  to  perform  by  deputy  an  imaginary 
routine.  If  any  one  should  still  be  unwisely  curious  to  pene- 
trate these  forgotten  absurdities,  he  must  considt  the  reports 
of  Parliamentary  commissions  from  1824  to  1834,  which  I'e- 
sultcd  in  their  abolition.  England,  Scotland,  and  Ireland  had 
each  its  own  exchequer,  repeating  these  costly  eccentricities 
inherited  from  the  Middle  Ages. 

Leaving  this  part  of  the  investigation  as  of  merely  secondary 
imiwrtance,  the  main  inquiry  must  be  directed  to  the  method 
of  administering  the  treasury.  This  was  an  inheritance  from 
Mr.  Pitt.  When  he  had  remodelled,  in  1787,  the  whole  sys- 
tem of  English  finance,  his  great  object  was,  not  only  to  restore 
order  and  method  where  only  confusion  had  existed,  but  to 
secure  the  ultimate  redemption  of  the  public  debt.  His  idea 
seems  to  have  been,  that,  if  a  sufficient  portion  of  the  ])erma- 
nent  revenue  were  to  be  sot  aside  and  appropriated  by  law  to 
the  payment  of  the  annual  interest  and  a  certain  part  of  the 
principal  of  the  debt,  the  result  would  be,  not  only  to  simplify 
the  accounts,  but  to  furnish  an  additional  guaranty  for  the 
national  credit.  He  therefore  divided  the  whole  of  the  reve- 
nues of  the  countiy  into  two  branches,  applicable  to  two 
distinct  classes  of  j)aymcnts.  The  first  comprised  all  the 
permanent  taxes,  united  into  one  r/tnuolidateil  faiKl,  and  this 
was  by  law  appropriated  to  the  payment  of  the  permanent 


BRITISH   FINANCE   IN   1816  285 

charges  of  the  national  debt  and  the  civil  list.  The  second 
comprised  the  taxes  voted  by  Pai'liament  only  for  the  year, 
and  was  left  for  the  charges  of  the  army  and  navy,  and  the 
civil  expenditure  of  the  government. 

Mr.  Pitt's  famous  sinking  fund  was  the  supplement  to  this 
plan.  His  original  scheme  was,  that  one  million  sterling  should 
be  applied  annually  from  surplus  revenue,  and  should  accumu- 
late at  compound  interest  until  the  whole  debt  should  be  ex- 
tinguished. 

These  large  and  ingenious  arrangements  answered  all  Mr. 
Pitt's  wishes  for  the  first  five  years.  His  success  was  such  as 
to  place  him  unquestionably  at  the  head  of  all  living  states- 
men. But  then  the  French  war  broke  out,  and  no  possible 
financial  scheme,  except  the  simplest,  could  have  resisted  the 
pressure  of  the  next  twenty-three  years.  In  a  surprisingly 
short  time  all  Mr.  Pitt's  elaborate  structure  crumbled  to 
pieces.  Yet  not  only  he,  but  all  his  successors,  climg  to  the 
hollow  shells  of  the  two  funds  with  an  obstinacy  as  remark- 
able as  their  conduct  of  the  war  itself.  For  every  new  loau 
that  was  raised,  Parliament  carefully  set  aside  some  new  tax 
to  meet  the  annual  charge,  and  appropriated  it  to  the  consoli- 
dated fund,  as  though  that  fund  still  had  some  inherent  virtue 
which  would  insure  the  payment  of  the  national  obligations 
in  case  all  the  rest  of  the  system  should  become  bankrupt,  or 
as  though  every  tax,  of  whatever  description,  was  not  just  as 
much  pledged  to  the  payment  of  the  interest  of  the  debt  as 
though  fifty  acts  of  Parliament  had  reasserted  the  fact.  This, 
however,  was  only  a  cumbrous  form  of  management.  The 
sinking  fund  had  became  a  most  pernicious  burden  on  the 
nation.  Every  loan  that  was  contracted,  however  ruinous  the 
terms,  was  increased  by  the  amount  of  a  certain  jjroportion 
of  the  whole,  which  was  set  aside  as  a  part  of  the  sinking 
fund.  In  other  words,  it  was  expected  to  pay  off  the  debt  by 
borrowing  money  at  a  time  wdien  the  nation's  credit  was  at  its 
lowest  ebb.  Under  this  treatmeat,  the  sinking  fund  rapidly 
grew  to  gigantic  jn'oportions.  It  was  perfectly  evident  that 
the  debt  also  increased  in  a  similar  or  a  greater  ratio  ;  but 


286  BRITISH   FINANCE   IN   1816. 

nevertheless  the  government  actually  introduced  a  measure, 
which  became  law,  restricting  the  operation  of  the  fund, 
on  the  ground  that  it  would  pay  off"  the  debt  too  rapidly. 
iN^othing  could  shake  the  infatuated  foith  of  the  British  people 
in  the  magical  efficacy  of  these  two  funds.  The  argument 
against  them  was  simply  met  by  the  assurance  that,  whether 
right  or  wrong,  the  confidence  of  the  public  and  the  respect 
of  foreign  nations  were  so  largely  founded  on  a  belief  in  the 
efficacy  of  the  system,  that  the  national  creait  would  not  stand 
the  shock  of  abandoning  it. 

However  effective  this  answer  may  have  been  during  the 
dark  years  of  the  war,  when  the  salvation  of  England  depended 
on  her  credit,  it  seems  as  though  the  return  of  peace  should 
have  deprived  it  of  finther  force.  Yet  the  two  funds  contin- 
ued to  flourish  with  unabated  energy.  The  original  scheme 
of  Mr.  Pitt  had  long  been  lost,  and  little  of  his  project  re- 
mained except  the  names  and  the  mistakes.  The  system  had 
ceased  to  be  comprehensible.  The  public  accoxmts  were  a 
chaos,  and  the  budget  speeches  seem  really  to  have  been  made 
with  the  intention  of  adding  to  the  confusion. 

Parliament  never  knew,  nor  could  know,  what  M'as  the  exact 
relation  between  the  income  and  expenditure  of  the  year ;  and 
when  unreasonable  radicals  supplicated  for  a  balance-sheet, 
they  were  answered  Jis  though  such  an  innovation  were  big 
M'ith  revolutionary  dangera.  The  fact  of  the  tptal  want  of 
a  balance-jjheet  seems  to  modem  minds  so  incredible,  that  it 
may  be  well  to  quote  a  passage  from  the  report  of  a  select 
conmiittee  on  the  public  accounts,  made  to  Parliament  in  1822, 
six  years  after  the  time  now  spoken  of. 

"  The  principal  and  most  prominent  defect  in  the  present  form  of 
the  accounts  is,  that  they  neither  Jo,  nor  can,  exhibit  any  balance 
b^^tween  the  income  and  expenditure  of  the  year.  The  income  side 
of  the  account  shows  tlio  amount  collected  from  the  subject  and  the 
amount  paid  into  the  exchequer  within  the  year The  expendi- 
ture-sheet has  not  been  framed  on  this  principle ;  and,  with  respect 
to  some  of  the  cliief  heads  of  the  service,  such  as  the  army  and  the 
ordnance,  in.><tead  of  containinj?  a  statement  of  the  issues  made  from 


BRITISH   FINANCE   IN    1816.  287 

the  exchequer,  it  gives  the  amount  of  payments  by  the  distributing 
pubUc  officers,  to  whom  the  moneys  required  for  their  respective  ser- 
vices are  issued  from  the  exchequer.  The  account  of  incomes  and 
the  account  of  expenditure,  therefore,  are  accounts  of  different  kinds, 
and  no  true  balance  can  be  struck  by  comparing  them  together." 

No  man,  whatever  industry  he  might  possess,  could  come  to 
an  undisputed  conclusion  upon  the  financial  situation  of  the 
coinitry.  Mr.  Hume  asserted,  in  1821,  and  no  less  an  author- 
ity than  Mr.  Ricardo  indorsed  the  statement,  that  not  only  was 
there  a  difference  of  some  millions  between  the  budget  and  the 
annual  accounts,  in  regard  to  the  reduction  of  debt,  but  even 
on  so  simple  a  matter  as  the  deficiency  of  the  consolidated 
fund  there  were  three  public  accounts,  all  signed  by  the  same 
person,  all  relating  to  the  same  period,  and  all  presenting  a 
different  result. 

If  Mr.  Hume,  whose  Scotch  sagacity  and  indefatigable  pa- 
tience liave  never  been  equalled,  and  Mr.  Ricardo,  who  was  the 
first'  political  economist  of  his  time,  abandoned  in  despair  the 
attempt  to  unravel  the  complications  of  the  consolidated  fund, 
which  was  then  the  principal  part  of  the  financial  system, 
the  chance  is  small  ijidced  that  any  man  in  the  present  day 
can  arrive  at  a  better  result.  The  budget  speeches  were 
almost  silent  in  regard  to  it,  and  the  information  given  by  the 
official  acco\mts  was  apparently  only  such  as  the  humorous 
disposition  of  the  public  accountant  incited  him  to  furnish  by 
way  of  a  riddle  for  the  amusement  of  over-zealous  members 
of  the  House  of  Commons.  If  the  difficulty  even  were  ex- 
plained, it  is  doubtful  whether  most  people  could  understand 
the  explanation.  The  nature  of  the  fund  has  already  been 
described.  Certain  taxes  were  appropriated  to  certain  pur- 
poses. So  long  as  the  taxes  were  sufficiently  productive  for 
those  payments,  the  system  worked  tolerably  well.  But  there 
were  sometimes  years  when  the  taxes  fell  off,  and  their  amount 
was  not  sufficient  to  meet  the  charges  put  by  law  upon  the 
fund.  When  this  happened,  the  government  borrowed  the 
amount  of  the  deficiency  from  the  Bank,  pledging  exchequer 
bills  in  return,  and  pledging  the  next  ([uarter's  receipts  of  the 


2gg  BRITISH    FINANCE   IN   1816. 

fund  to  meet  and  pay  these  exchequer  bills.  The  deficiency 
meanwhile  might  or  might  not  be  reckoned  as  a  part  of  the 
annual  deficiency,  or  a  deduction  from  the  annual  surplus. 
The  Chancellor  of  the  Exchequer  enjoyed  a  wide  latitude  of 
conscience  on  that  point,  and  it  was  sometimes  very  con- 
venient to  be  able  to  shut  his  eyes  to  a  deficit  of  seven  or 
eight  million  pounds,  with  which  of  course  neither  he  nor  the 
House  nor  the  country  had  anything  to  do,  since  it  concerned 
only  the  consolidated  fund.  The  consolidated  fund  existed  for 
the  very  purpose  of  providing  for  the  national  debt,  without 
allowing  the  matter  to  enter  into  the  range  of  common  ques- 
tions of  supply.  Tiiere  was,  therefore,  much  to  be  said  in 
favor  of  the  official  view  of  the  question. 

But  the  transaction  did  not  always  end  even  here.  The 
fund  borrowed,  as  a  sort  of  independent  corporation,  the 
amount  of  its  arrears  from  the  Bank.  Let  us  suppose  ten 
millions  to  have  been  boiTowed  in  this  way.  The  Bank  re- 
ceived the  taxes  composing  the  resources  of  the  fund  as  fast  as 
they  were  collected.  Let  us  suppose  a  quarter's  income,  or 
say  eight  million  poimds,  to  have  been  nearly  received,  consti- 
tuting the  guaranty  for  the  debt  owed  by  the  fund.  The  gov- 
ernment now  stepped  in  and  borrowed  this  eight  million  for 
its  immediate  wants,  thus  exhibiting  the  strange  anomaly  of 
first  creating  a  fund  for  no  other  purpose  than  to  secure  the 
payment  of  debt,  then  allowing  that  fund  to  create  a  debt  of 
its  own,  and,  finally,  itself  borrowing,  as  an  advantage  to  the 
public,  its  own  money,  which  was  already  doubly  jjledged,  and 
substituting  its  own  bonds  as  the  security  for  the  security  of 
the  security  for  the  national  securities. 

Is  it  to  bo  wondered  at  that  the  cleverest  men  in  England 
were  mystified  when  these  transactions  were  put  before  them 
piecemeal  in  separate  accounts,  and  they  were  asked  to  guess 
the  riddle?  It  was  notorious,  that  tlie  Chancellor  of  the  Kx- 
checiuer  himself,  whose  experience  at  least  was  am])lc,  did  not 
understand  the  very  explatiations  which  he  himself  made  to 
the  House,  far  less  the  accounts  that  came  to  him  from  his  own 
depttrtmcut.     The  otficers  of  the  Exchecpier  openly  confessed 


BRITISH   FINANCE   IN    1810.  289 

tlmt  they  could  not  comprehend  the  accounts  which  they  made 
out,  and  to  which  their  names  were  signed.  The  public  knew 
nothing  but  its  taxes. 

There  was  another  evil  incident  to  this  confused  condition 
of  the  finances.  The  functions  of  the  Exchequer  were  as- 
sumed by  the  Bank  of  England ;  and  in  the  absence  of  a 
powerful  mind  at  the  head  of  the  government,  the  Bank  had 
become  almost  the  exclusive  director  of  the  financial  policy 
of  the  countr}'.  Tlie  management  of  the  Bank  was  not  so 
remarkable  for  ability  at  this  time  as  to  make  such  an  ar- 
rangement a  great  advantage.  Mr.  Ricardo  went  so  far  as  to 
say  that  it  was  totally  ignorant  of  the  principles  of  political 
economy.  When  the  House  of  Commons  decided,  in  1819, 
to  return  to  specie  payments,  the  Bank  presented  a  remon- 
strance which  contained  a  remarkable  paragraph,  appealing  to 
its  duties  to  the  community  at  large,  "whose  interests  in  a 
pecuniary  and  commercial  relation  had,  in  a  great  degree,  been 
intrusted  to  its  discretion."  This  assumption  of  authority,  on 
the  part  of  a  mere  subordinate  office,  was  treated  by  Mr.  Peel 
as  a  melancholy  truth,  the  fault  of  Parliament  itself,  and  of 
the  government  which  had  thus  allowed  its  functions  to  fall 
into  the  hands  of  a  private  corporation. 

If  an  energetic  reform  was  required  in  the  system  of  taxa- 
tion and  in  the  administration  of  the  public  property,  it  was 
certainly  not  less  necessary  to  subject  the  expenditure  to  the 
most  rigid  scrutiny.  A  thoroughly  economical  government  is 
among  the  rarest  blessings  ever  vouchsafed  to  a  nation,  and  a 
long  period  of  war  does  not  tend  to  teach  or  to  encourage  the 
habit  of  frugality.  Besides,  the  English  sj'stem  of  govermeut 
and  of  society  was  essentially  an  extravagant  one,  and  only  the 
most  resolute  popular  opposition  coidd  make  the  ruling  party 
conscious  of  this  fact. 

There  were  two  great  branches  in  the  national  expenditure, 
which  were  about  equal  in  amount.  There  was,  in  the  first 
place,  the  regular  annual  interest  on  the.national  debt,  funded 
and  floating,  which  amounted  to  aioie  than  £30,000,000  ster- 
ling; and  this  was,  for  the  time,  beyond  the  reach  of  economy. 


290  BRITISH   FINANCE   IN   1816. 

But  even  here  there  was  much  to  be  done.  It  was  necessary 
to  fund  a  large  amount  of  the  exchequer  bills.  It  was  neces- 
sary to  look  sharply  to  the  management  of  the  debt  by  the 
Bank.  Above  all,  it  was  the  part  of  a  good  finance  minister 
so  to  adapt  his  measures  as  to  encourage  popular  confidence  in 
the  national  credit,  in  order  to  hasten  the  moment  when  a 
reduction  of  interest  should  be  possible  on  the  most  burden- 
some of  the  public  securities.  This  in  itself  involved  a  whole 
system  of  finance,  and  demanded  ability  of  the  highest  order. 

The  second  branch  of  the  expenditure  was  divided  into  sev- 
eral heads.  There  were  the  civil  expenses  of  government,  the 
army,  the  navy,  the  ordnance,  and  a  miscellaneous  division 
which  embraced  a  variety  of  appropriations  as  well  for  internal 
improvements  as  for  other  purposes. 

The  most  immediate  want  was,  of  course,  a  large  measure 
of  reduction  in  the  armaments,  to  be  followed  by  an  elaborate 
reform  in  the  various  departments.  During  some  years  of  the 
war,  the  expenditure  on  this  account  had  risen  to  more  than 
seventy  millions,  exclusive  of  foreign  subsidies.  The  question 
of  what  should  be  the  proper  peace  establishment  was  one  of 
especial  difficulty  to  a  generation  which  had  scarcely  known 
any  condition  but  that  of  war  ;  and  it  was  made  still  more 
emban-assing  by  the  disturbed  state  of  Ireland,  requiring  it  to 
be  treated  like  a  conquered  country,  as  well  as  by  the  immense 
colonial  possessions  of  Great  Britain,  which  seemed  to  demand 
protection  on  account  of  their  exposed  positions  and  the  mix- 
ture of  races. 

The  civil  expenditure  of  the  government  had  also  been 
allowed  to  flourish  in  luichecked  extravagance  during  the  war. 
There  was  a  rich  field  for  reformei-s  and  iwlioals  in  tlie  extir))a- 
tion  of  those  numerous  sinecure  offices  whose  quaint  names 
and  obsolete  functions  were  little  known  to  the  public,  excejjt 
BO  far  as  the  regular  annual  parliamentary  accounts  establislied 
the  fact  that  there  were  still  men  who  drew  the  salaries  at- 
tached to  them.  The  whole  amount  of  the  civil  expenditure 
did  not,  indeed,  form  a  very  large  proportion  of  the  public 
burdens.     Two   or  three  million  pounds  covered  the  whole 


BRITISH   FINANCE    IN    JSI(i.  291 

charge.  But,  large  or  small,  it  was  too  heavy  for  the  tax- 
payers, who  were  justly  indignant  if  a  single  shilling  were  un- 
necessiirily  added  to  the  enormous  sum  which  they  were  obliged 
to  pay.  There  was  the  moi"e  excuse  for  the  most  rigid  econ- 
omy, since  the  privilege  of  possessing  a  constitutional  monarch 
and  an  aristocratic  court  was  by  no  means  obtained  for  noth- 
ing. His  Majesty's  household  cost  the  nation  more  than  a 
million  sterling  annually,  with  no  visible  return,  since  the 
King  was  blind  and  insane,  and  lived  in  close  confinement  at 
Windsor.  How  much  the  Prince  Regent  cost,  Heaven  only 
knows.  He  drew  £65,000  a  year  by  way  of  pension  on  the 
consolidated  fund ;  but  as  he  was  perpetually  in  debt,  and  as 
the  country  was  perpetually  called  upon  to  pay  his  debts,  it  is 
not  easy  to  discover  where  the  expense  ended.  Besides  the 
King  and  the  Prince  Regent,  there  were  fifteen  royal  princes 
and  princesses  who  drew  pensions,  varying  from  £  35,000 
downwards,  from  the  consolidated  fund  alone,  making  an  ag- 
gregate of  rather  more  than  £  250,000  annually,  on  account 
of  the  royal  family  ;  in  return  for  which  the  nation  not  only 
failed  to  obtain  a  magnificent  court,  but  was  obliged  to  satisfy 
itself  w^ith  one  which  was  particularly  offensive  to  its  tastes. 

It  was,  however,  the  British  theory  to  pay  public  servants 
well,  except  where  they  were  not  paid  at  all.  Perhaps  noth- 
ing would  have  stung  the  average  British  mind  more  sharply, 
than  the  idea  that  the  representatives  of  his  country  abroad 
were  unable  to  maintain  as  high  a  scale  of  expense  as  those  of 
France,  Russia,  and  Austria.  The  example  of  Prussia  and 
the  United  States  of  America  was  of  no  effect,  except  to  place 
those  countries  low  in  the  British  estimation.  It  was  certain, 
however,  that  the  gratification  of  this  fancy  added  largely  to 
the  national  expenditure ;  not  so  much,  perhaps,  from  the  ac- 
tual salaries  paid,  as  by  the  scale  of  expense  which  was  en- 
couraged, and  the  habit  of  lavishing  large  sums  for  small  ob- 
jects. The  most  burdensome  form  in  which  this  practice 
showed  itself  was  in  the  shape  of  pensions,  superannuation 
allowances,  and  similar  charges,  either  for  life  or  in  perpetuity  ; 
which,  considering  the  fact  that  the  salaries  themselves  were 


292  HRITISH   FINANCi:    L\    I.-^IC 

in  most  cases  so  liberal,  seem  to  have  been  somewliat  super- 
fluous, and  by  no  means  calculated  to  impress  any  lesson  of 
econom;)  iipon  the  servants  of  the  crown.  The  precise  amount 
of  all  the  different  classes  of  pensions  after  the  war  cannot 
easily  be  ascertained,  if,  indeed,  it  is  at  all  possible  to  collect 
them  from  the  published  accounts  of  so  many  various  depart- 
ments thi-oughout  the  three  kingdoms ;  but  they  formed  one 
of  the  most  serious  items  of  expense  with  which  the  govern- 
ment had  to  deal,  and  those  connected  with  the  army  and 
navy  gave  occasion,  in  1822,  for  an  effort  on  the  part  of  Mr. 
Vansittart  to  diminish  their  burden,  which  was  the  last  of 
many  financial  operations  effected  by  him,  and  which  made  his 
name  long  notorious. 

We  have  now  passed  in  review,  rapidly,  and  no  doubt  super- 
ficially, but  at  as  much  length  as  is  possible,  the  financial 
difficulties  with  which  England  at  the  close  of  the  war  had  to 
struggle,  so  far  as  they  related  to  the  revenue.  It  would  have 
been  fortunate  for  her  if  these  had  been  the  only  evils  be- 
queathed to  her  by  the  war.  Serious  as  they  were,  although 
they  demanded  the  most  laborious  attention,  the  exercise  of 
the  highest  order  of  intellect,  and  the  most  resolute  perse- 
verance, there  remained  still  another  evil,  which  lay  behind 
them  all,  and  demanded  an  immediate  remedy. 

Considering  the  length  and  the  violence  of  the  strain  to 
which  the  resources  of  England  had  been  subjected,  it  is  rather 
a  matter  of  surprise  that  her  currency  had  not  become  utterly 
worthless,  than  that  it  should  have  suffered  a  certain  degree  of 
depreciation.  The  Bank  had  suspended  specie  payments  in 
1797  ;  but  for  more  than  ten  years  after  that  time  the  Bank 
paper  remained  on  a  par  with  gold,  or  at  a  very  slight  dis- 
count. It  was  only  in  1809  that  the  price  of  bullion  began  to 
maintain  itself  at  a  permanently  higher  rate,  which  continued 
till  the  close  of  the  war.  In  1810,  the  average  depreciation 
of  the  cun-ency  was  13^  per  cent.  In  1814,  it  was  25  per 
cent,  and  this  was  its  lowest  p<Mnt.  In  1815  and  1816,  the 
Bank  paper  gained  credit,  and  averaged  16-^0  per  cent  dis- 
count.    Towards  the  close  of  the  year  181 G  the  currency  rose 


BRITISH    FINANCE    IN    1816.  293 

witliout  the  necessity  of  legislation,  until  it  stood  on  a  par  with 
gold.  Unfortunately,  however,  the  mere  fact  that  the  Bank 
notes  were  of  the  same  value  as  gold  was  by  no  means  equiva- 
lent to  a  return  to  specie  payments.  The  coimtry  had  gone 
through  a  period  of  depreciation,  and,  if  this  were  allowed  to 
continue,  was  certain  to  be  demoralized  by  it.  Already  the 
agricultural  interest  complained  because  the  farms,  leased  at  a 
time  when  corn  sold  at  six  pounds  the  quarter,  could  no  longer 
be  made  to  pay  the  extravagant  rental  thus  fastened  upon 
them.  The  business  classes,  the  merchants,  the  bankers,  the 
retailers,  naturally  timid  in  the  face  of  measures  likely  to 
affect  their  interests,  trembled  with  fear  at  the  thought  of 
commencing  business  upon  a  system  entii-ely  new  to  all  but  the 
oldest  among  them.  Every  mouth  that  the  retuni  to  a  specie 
basis  was  delayed  strengthened  the  ultimate  opposition  to  the 
measure,  and  encouraged  the  party  which  maintained  that 
promptness  was  dangerous,  and  that  it  was  necessary  by  act 
of  Parliament  to  prevent  the  nation's  too  eas}'^  progress  up  an 
ascent  so  difficult  that  few  nations  have  ever  succeeded  in 
climbing  it. 

The  history  of  the  process  by  which  Great  Britain  succeeded 
at  length  in  restoring  its  original  standard  of  value  is  one  so 
important,  so  instructive,  but  also  so  complicated  and  disputed, 
that  it  cannot  be  dealt  with  in  a  few  sentences.  It  requires 
an  entire  chapter  to  itself.  It  called  into  full  play  the  best 
ability  in  England,  and  for  many  yeai-s  after  the  result  was 
accomplished  a  perpetual  dispute  was  maintained  in  regard  to 
its  justice  and  its  effects.  Among  the  many  financial  difficul- 
ties which  sun'ounded  the  government  of  that  day,  this  was  the 
one  which  a  high  statesmanship  would  have  considered  tlie 
most  pressing,  for  it  lay  at  the  basis  of  all  transactions  involv- 
ing an  exchange  of  values,  as  well  between  the  government 
and  its  subjects  as  between  every  individual  and  his  neighbor. 

With  this  last  difficult  problem  of  the  currency  our  survey 
of  the  financial  situation  of  Great  Britain  may  be  considered 
completed.  Yet  something  remains  to  be  said  in  regard  to  the 
men  upon  whom  the  vast  labor  fell  of  restoring  order  in  the 


294  BRITISH    FINANCE   IN    181G. 

national  affairs,  and  of  creating  the  new  formulas  by  which 
the  economy  of  the  nation  was  destined  in  the  future  to  be 
represented.  For  it  is  obvious  that  between  such  a  condition 
as  has  been  described  and  that  wliich  England  eujoys  at  pres- 
ent there  is  not  a  difference  of  degree,  but  of  kind.  It  is  a 
complete  revolution  that  has  taken  place,  and  not  merely  a 
modification.  Only  fifty  years  have  passed,  and  there  has  been 
no  break  of  continuity  ;  a  steady  and  natiu'al  process  of  devel- 
opment has  been  always  going  on,  always  irresistibly  tending 
towards  one  result,  until  at  length  we  find  that  the  principles 
npon  which  the  government  of  England  acts  are  the  direct 
reverse  of  those  which  it  considered  essential  in  1816.  Mr. 
Huskisson,  Mr.  Peel,  and  Mr.  Frederick  Robinson  were  all  in 
the  government  at  the  close  of  the  war,  and  supported  Mr. 
Vansittart's  measures  so  far  as  they  were  called  upon  to  do  so  ; 
yet  these  were  the  very  men  by  whom  the  subsequent  policy 
was  created  and  developed.  There  appears  to  be  something 
that  needs  explanation  in  this  curious  copartnership. 

Lord  Liverpool's  followers  comprised  a  considerable  majority 
of  the  House  of  Commons,  and  nsnally  followed  their  leader 
without  useless  remonstrance,  wherever  their  orders  directed. 
But  nevertheless  the  government  itself  contained  two  classes 
of  members  so  strangely  differing  in  character  that  their  suc- 
cessful co-operation  may  well  be  a  matter  of  surprise. 

Lord  Liverpool's  own  opinions  were  natiu'ally  sound  and 
liberal  upon  economical  questions,  thougli  he  wanted  the  force 
of  personal  character  to  stamp  them  upon  his  administration. 
Nor  indeed  was  there  even  in  men  like  Lord  Castlercagh,  Mr. 
Vansittart,  and  Mr.  Rose  any  such  devotion  to  anti()uated 
prejudices  as  might  be  supposed  from  the  condition  of  the  de- 
partments  they  directed.  Mr.  Vansittart  was  not  a  man  gifted 
with  the  blind  Toryism  of  Lord  Sidmouth,  or  the  narrow- 
minded  j)erverseneH8  of  Lord  Eldon.  He  was  sim})ly  a  thor- 
oughly incompetent  man.  It  would  scarcely  be  worth  the 
while  to  dwell  upon  his  qualities  at  any  length,  if  it  were  not 
that  he  was  almost  a  perfect  representative  of  the  old  school 
of  financiers,  —  the   school  of  Perceval  and  Addington,  —  a 


BRITISH    FINANCE   IN   181G.  295 

school  which  had  spning  from  Mr.  Pitt's  side  wlien  his  better 
days  had  passed,  and  which  lent  the  influence  of  narrow  minds 
to  encourage  and  aggravate  the  mistakes  of  a  great  one.  Eng- 
hsh  finance  hap  not  even  yet  entirely  cleared  itself  from  the 
traditions  of  this  period. 

Mr.  Vansittart  had  served  long  in  the  treasury,  and  had 
stored  his  mind  with  all  the  intricate  knowledge  of  financial 
machinery  that  a  laborious  subordinate  can  always  so  readily 
learn.  Mr.  Pitt,  no  doubt,  was  an  object  of  his  miboimded 
admiration.  But  the  qualities  which  he  would  admire  in  Mr. 
Pitt  would  probably  be  precisely  those  which  caused  him, 
with  all  his  genius,  to  create  nothing  which  has  endured. 
Men  like  Mr.  Vansittart  and  his  contemporaries  in  office 
thought  it  little  that  Mr.  Pitt  had  aimed  at  magnificent  re- 
sults, that  his  ambition  led  him  into  a  superb  attempt  to  pay 
off  the  national  debt,  and  that  to  effect  his  purpose  he  had 
created,  with  scarcely  any  assistance  from  precedent,  a  great 
and  admirable  system  where  none  existed  before.  What  daz- 
zled the  eyes  of  Mr.  Pitt's  successors  was,  that  the  machinery 
invented  by  him  was  rich  in  detail  and  ingenious  in  expe- 
dients. That  every  loan  should  have  its  special  tax,  that 
every  tax  should  go  to  a  special  fund,  that  each  fund  should 
be  so  constructed  as  to  balance  and  support  the  other,  —  that 
there  should  be  wheels  within  wheels,  and  springs  beneath 
springs,  until  the  whole  structure  was  elaborated  to  a  point 
of  theoretical  perfection,  —  this  it  was  that  seemed  wonderful 
to  the  men  that  had  seen  its  creation  and  had  received  it  from 
the  hands  of  its  dying  inventor.  The  results  of  such  an  educa- 
tion were  most  disastrous  to  England,  for  there  arose  a  race  of 
so-called  financiers  ;  —  men  who  drew  their  political  economy 
from  the  traditions  of  the  Exchequer,  and  their  financial  knowl- 
edge from  the  Stock  Exchange;  men  whose  highest  idea 
of  a  policy  was  the  skill  to  place  a  loan  at  a  half  per  cent 
better  terms  than  its  predecessor  had  obtained ;  men  who  to 
effect  this  tried  to  mystify  the  public,  and  to  avail  themselves 
of  all  the  complications  in  which  the  official  accounts  were  so 
rich ;  men  who  in  the  struggle  to  obtain  means  for  carrying 


296  BRITISH   FINAXCK   IN    18IG. 

on  tie  war  forgot,  that  there  were  laws  which  regulated  the 
limits  of  taxation,  to  go  beyond  which  was  a  folly  and  a  crime; 
and  finally,  men  who,  in  their  zeal  to  raise  money,  entirely 
disregarded  the  fact,  that  the  first  duty  of  a  finance  minister 
is  to  exercise  some  degree  of  economy  in  spending  it. 

As  a  Chancellor  of  the  Exchequer,  Mr.  Vansittart's  inca- 
pacity was  scarcely  a  matter  of  dispute.  But  he  possessed, 
from  long  experience,  the  kind  of  tact  and  bxvsiness  knowledge 
which  gives  men  influence  in  the  House  of  Commons,  and  fre- 
quently enabled  him  to  meet  with  success  the  attacks  of  the 
Whig  opposition.  There  was  in  his  character  a  fund  of  good 
nature  and  a  cordial  indifference  to  abuse  which  attracted 
sympathy,  and  protected  him  when  opposition  members  howled 
in  his  face,  that  "the  present  distresses  were  occasioned  by 
having  a  miserable,  miscalculating,  puny  Chancellor  of  the  . 
Exchequer,  who  did  not  know  the  resources  of  the  country, 
owing  to  the  ignorance  and  want  of  power  of  his  little  mind." 
Although  a  heavy  burden  to  the  Ministry  of  which  he  was  a 
member,  he  long  retained  his  office,  and  only  retired  to  the 
honorable  ease  of  the  House  of  Lords  in  1822,  after  having 
been  ten  years  at  the  head  of  the  finances. 

Of  the  liberal  wing  of  the  administration  Mr.  Huskisson 
was  by  far  tlie  ablest  member,  and  indeed  it  is  not  too  much 
to  say  that,  within  his  own  sphere  of  economical  subjects,  he 
was  not  surpassed  by  any  man  then  in  public  life.  The  ex- 
tent of  his  knowledge,  the  soundness  of  liis  judgment,  the 
breadth  of  his  views,  and  his  natural  instinct,  leading  him 
always  to  stand  just  so  far  in  advance  of  his  contemjwraries 
as  to  inspire  them  with  confidence  in  the  safety  and  moder- 
ation of  his  guidance  without  obliging  them  to  accept  para- 
doxical or  unpopular  trutlis,  —  these  qualities  combined  to 
give  Mr.  Huskisson  a  pei-sonal  weight  which  only  needed  the 
support  of  high  office  to  prove  itself  in  great  administrative 
reforms.  But,  unfortunately,  he  was  no  politician,  and  in 
consequence  had  so  managed  his  party  course  as  to  throw 
away  the  power  he  had  a  right  to  claim,  until  at  forty-six 
years  uid  he  still  found  himself  buried  out  of  sight  as  Chief 


BRITISH   FINANCE   L\    1816.  297 

Commissioner  of  Woods  and  Forests,  when  he  might  and 
should  have  been  in  a  commanding  position  in  the  Cabinet. 

The  political  blunders  of  Mr.  Huskisson  had  thrown  a 
younger  and  much  weaker  man  into  the  foreground.  Mr. 
Frederick  Robinson,  the  Vice-President  of  the  Boai'd  of  Trade, 
rapidly  rose  to  be  President  of  that  Board,  Chancellor  of  the 
Exchequer,  Secretary  for  the  Colonies,  and  Prime  Minister. 
Mr.  Frederick  Kobinson,  Lord  Goderich,  or  Earl  of  Ripon,  by 
whichever  name  we  may  choose  to  call  him,  was  a  man  of 
considerable  abilities  and  a  decidedly  liberal  tura  of  mind ; 
but  as  a  statesman  he  was  particularly  happy  iu  having  two 
great  men  at  his  side,  Mr.  Canning  and  Mr.  Huskisson.  With 
their  assistance  he  accomplished  great  results,  Avithout  it  he 
found  the  burden  of  a  high  position  intolerable.  At  the  re- 
turn of  peace  he  was  still  in  a  subordinate  office,  but  even 
there  his  influence  was  thrown,  not  without  effect,  on  the  side 
of  progress  and  reform. 

It  cannot  be  said  that  this  was  the  case  with  Mr.  Peel,  who 
was  the  Chief  Secretary  for  Ireland  at  this  time.  Mr.  Peel's 
power  consisted,  not  so  much  in  the  opinions  which  he  held 
and  advocated,  as  in  his  capacity  for  changing  them  at  the 
right  moment.  Few  statesmen  of  his  rank  have  changed  their 
political  creed  so  much  and  on  so  many  points ;  perhaps  not 
one  has  ever,  like  him,  succeeded  through  all  changes  in  re- 
taining popular  confidence  and  esteem.  At  the  close  of  the 
war  he  was  an  extreme  Tory  ;  and  although  he  was  ultimately 
influenced  greatly  by  his  association  with  Mr.  Huskisson,  it 
was  a  very  long  time  before  he  became  a  convert  to  those 
opinions  on  questions  of  trade  which  have  made  his  reputa- 
tion eclipse  that  of  his  teacher.  It  is  one  of  the  most  curious 
facts  of  modern  English  history,  that  he  who  in  1817  was  the 
ally  of  Lord  Sidmouth  and  Lord  Eldon  should  have  become 
tfic  disciple  of  Cobden  and  the  model  of  Gladstone. 

The  ablest  of  all  the  statesmen  of  this  period  was  certainly 
Mr.  Canning.  But,  unfortunately  both  for  himself  and  for  the 
coimtry,  Mr.  Camiing  had  allowed  the  wave  of  political  success 
to  sweep  over  hun,  and  to  carry  Lord  Castlercagh  on  its  crest. 


298  BRITISH   FINANCE   IN   1816. 

It  was  not  until  Lord  Castlereagh's  death,  in  1822,  that  Mr. 
Canning's  influence  obtained  the  control  of  the  administration, 
and  began  to  set  in  action  the  progressive  energies  of  the 
nation. 

All  these  men  belonged  to  the  Tory  party.  The  old  Whig 
opposition  had  little  to  offer  that  was  better,  if  so  good,  and 
what  little  it  had  was  soon  lost.  The  ablest  of  the  Whigs  in 
the  field  of  financial  science  was  Mr.  Francis  Horner,  who,  as 
chainnan  of  the  famous  Bullion  Committee,  had  treated  very 
roughly  the  strange  absurdities  of  Mr.  Vansittart.  The  report 
of  that  committee,  of  which  he  was  for  the  most  part  the  au- 
thor, was  made  in  1810,  and  in  spite  of  the  triumphant  vote 
by  which,  in  1811,  Mr.  Vansittart  carried  his  resolution,  that 
"  the  promissory  notes  of  the  Bank  of  England  have  hitherto 
been,  and  are  at  this  time  held  to  be  equivalent  to  the  legal 
coin  of  the  realm,"  Mr.  Horner's  argument  practically  settled 
the  question,  and  made  his  opponent's  name  an  object  of  stand- 
ing ridicule  down  to  this  day,  —  a  result  the  more  annoying, 
since  Mr.  Vansittart  was  not  himself  the  real  author  of  the  res- 
olution. It  is  safe  to  say  that,  if  Mr.  Horner  had  lived,  his 
influence  on  the  financial  and  commercial  policy  of  England 
would  have  been  very  considerable  :  but  his  death,  which  took 
place  in  1817,  broke  short  a  most  promising  career,  and,  com- 
bined with  that  of  Sir  Samuel  llomilly,  deprived  the  Whig 
opposition  of  all  its  best  vital  force. 

For  it  cannot  be  said  that  Mr.  Henry  Brougham's  brilliant 
qualities  at  all  supplied  the  place  of  Mr.  Horner's  sound  intel- 
lect. Mr.  Brougham  busied  himself  with  economical  questions, 
as  he  did  with  every  other  topic ;  but  before  and  above  all,  he 
was  a  politician,  and  a  selfish  one.  A  man  of  far  greater 
worth,  from  every  point  of  view,  was  Mr.  Ricardo,  whose  posi- 
tion as  a  member  of  Parliament  often  enabled  him  to  infuse 
into  the  debates  a  spirit  of  philosophy  which  is  rare  enough 
in  the  best  of  legislative  assemblies.  Ho,  however,  did  not 
enter  Parliament  till  1819 ;  and  his  death,  in  1823,  took  place 
before  the  new  theories  of  internal  policy  were  fairly  developed. 
Another  persor,  wlio  came  into  public  life  at  the  same  time, 


BRITISH   FINANCE   IN    1816.  299 

but  whose  career  lasted  through  all  the  vicissitudes  of  free 
trade  down  to  a  very  late  day,  was  au  eminently  useful  and 
energetic  reformer,  whom  the  English  public  laughed  at  and 
abused  during  his  whole  life,  but  discovered  after  his  death 
to  have  been  one  of  those  rare,  bold,  indefatigable,  and  scrupu- 
lously honest  characters,  whose  existence  makes  amends  for  a 
world  of  Parliamentary  nobodies.  This  was  Joseph  Hume,  — 
a  thorn  in  the  side  of  each  successive  ministry,  a  sort  of  self- 
constituted  tribune  of  the  people,  with  an  eye  for  abuses  and  a 
tongue  for  dilating  upon  them  that  made  him  at  once  the  ter- 
ror of  ministers  and  of  the  House,  which  fled  from  his  speeches 
with  some  reasonable  excuse.  Mr.  Hume  was,  however,  a  man 
of  broad  and  statesmanlike  views,  which  is  more  than  can 
fairly  be  said  of  Mr.  Cobbett,  though  the  latter  was  even  more 
active  in  his  denunciation  of  the  evils  that  were  so  strongly 
stamped  upon  the  system  of  internal  government.  In  fiict, 
the  popular  feeling  was  too  strongly  directed  upon  political 
grievances  to  allow  of  its  giving  any  deep  attention  to  difficult 
financial  and  commercial  questions,  the  connection  of  which 
with  its  own  objects  was  not  alsvays  obvious ;  and  popular 
orators,  like  Cobbett  and  Hunt,  exercised  only  an  indirect  and 
very  modified  influence  upon  the  development  of  those  liberal 
and  progressive  economical_  theories  which  neither  Whig  nor 
Tory  could  claim  as  exclusively  their  own  property,  but  which 
each  party  made  use  of  in  its  turn. 

.  Thus  it  will  be  seen  how  small  was  the  number  of  promi- 
nent men  who,  in  1816,  could  exercise  an  influence  in  favor  of 
reform.  And  in  this  respect  it  is  only  right  to  do  justice  to 
Lord  Liverpool  and  Mr.  Vansittart.  Neither  they  nor  their 
opponents  considered  finance  as  a  field  for  party  divisions. 
Mr.  Vansittart's  want  was  one  of  capacity,  not  of  will.  It  is 
a  curious  fiict  that  he,  though  administering  a  system  in  which 
jn'otection  was  carried  to  absurdity,  was  yet  in  his  opinions  a 
free-trader,  as  was  also  Lord  Liveipool.  Both  of  them  were 
far  in  advance  on  this  point  of  the  public  opinion  of  their 
time ;  for  the  popular  wishes  so  far  as  concerned  finance  were 
solely  directed  to  the  reduction  of  taxation,  and  the  knowl- 


300  BRITISH   FINANCE   IN    1816. 

edge  of  financial  theories  was  extremely  slight  even  among  the 
wealthiest  of  the  middle  class.  This  was  shown  in  regard  to 
the  income  tax.  Fifty  years  later  the  income  tax  was  a  pop- 
ular measure,  since  it  threw  upon  the  holders  of  property  an 
immediate  burden  which  otherwise  must  have  been  borne  by 
the  poor.  In  1816  the  property  tax  was  thoroughly  unpop- 
ular, not  only  among  the  rich,  but  among  the  poor  whom  it 
relieved,  and  who  actually  allowed  themselves  to  be  persuaded 
that  the  heavy  duties  on  corn,  tea,  beer,  and  tobacco  were 
preferable  to  one  which  they  did  not  feel !  It  was  necessary, 
therefore,  that  the  small  body  of  political  economists  who  saw 
in  advance  that  free  trade,  whether  suitable  or  not  for  other 
nations,  was  the  only  possible  policy  for  England,  should  be- 
gin at  the  very  foundation,  and  educate  even  those  for  whose 
special  benefit  their  measures  would  immediately  operate. 
There  was  no  basis  of  existing  public  opinion  upon  which  they 
could  stand. 

If,  then,  we  attempt  to  sum  up  the  results  of  this  long 
inquiry  into  a  condition  of  att^airs  now  forgotten,  we  shall 
find  that  Groat  Britain,  then  a  nation  of  twenty  million  in- 
habitants, was  burdened  with  an  annual  charge  of  more 
than  £  30,000,000  of  debt,  to  which  was  added  more  than 
£  20,000,000  of  oi'dinary  expenditure  ;  that  her  administra- 
tive system  was  in  the  highest  degree  cumbrous,  expensive, 
and  inefficient ;  that  her  revenue  was  drawn  indiscriminately 
from  every  available  source,  without  regard  to  the  disjistrous 
results  upon  national  industries  and  the  national  character, 
and  in  violation  of  all  the  acknowledged  principles  of  political 
economy ;  that  her  expenditure  was  extnivagant,  and  without 
an}'  sufficient  check  in  public  opinion  ;  that  her  currency  wa.s 
deranged,  and  the  standard  of  value  fluctuating  in  such  a 
maimer  as  to  stinnilate  powerful  interests  t<Avards  resistance 
to  any  return  to  the  former  specie  basis ;  that  her  principal 
officers  were  uneqiial  to  the  eftbrt  which  a  return  to  sound 
financial  and  economical  principles  would  have  required  ;  that 
I'urlianient,  with  the  exce])tion  of  a  very  few  of  its  members, 
was  incompetent  to  deal  properly  with  such  a  state  of  afiiiirs, 


BRITISH   FINANCE   IN    1810.  801 

and  too  apt  to  be  influenced  by  personal  and  political  motives  ; 
and,  finally,  that  the  people  were  themselves  ignorant  of  the 
true  nature  of  the  difficulties  under  which  they  were  labor- 
ing, and  the  few  really  progressive  minds  in  England  were 
obliged  to  trust  to  those  natural  popixlar  instincts  which  in 
the  end  usually  decide  rightly  in  regard  to  the  interests  of 
the  people. 

It  was  not  surprising  that  some  oY  the  most  patriotic  and 
excellent  Englishmen  were  in  alarm  lest  their  country  should 
succumb  under  this  accumulation  of  difficulties.  And  yet  a 
few  years  of  peaceful  development  enabled  it  to  support  the 
burden  of  the  debt  with  an  ease  which  is  a  just  subject  for 
pride ;  it  purged  the  administrative  system  of  its  abuses,  and 
made  it  comparatively  simple,  economical,  and  efficient ;  it 
created  a  wholly  new  system  of  revenue,  founded  on  sound 
laws,  and  interfering  to  the  least  possible  extent  with  the 
industry  and  character  of  the  people.  If  it  has  not  restricted 
the  expenditure,  and  reduced  the  debt  so  far  as  was  possible 
and  right,  this  is  merely  because  the  people  themselves,  in 
tlieir  wealth,  became  indifferent  and  extravagant ;  it  restored, 
without  any  concession  to  interested  clamor,  the  ancient  and 
only  sound  basis  to  the  ciuTency  ;  it  educated  a  race  of  states- 
men who,  in  regard  to  economical  subjects,  were  certainly  not 
inferior  to  any  in  the  world ;  it  placed  in  Parliament  numbers 
of  men  who,  whatever  their  faults  may  have  been  or  may  now 
be,  were,  and  are  now,  better  acquainted  with  those  laws  of 
financial  science  —  ignorance  of  which  has  become  inexcusa- 
ble in  legislators  —  than  the  members  of  any  other  legislative 
assembly  in  Europe  ;  and,  finally,  it  has  diffused  among  the 
people  a  degree  of  acquaintance  with  the  true  bearing  of  their 
own  interests,  which  has  strangely  modified  their  national  ten- 
dencies, and  will  ultimately  wholly  break  down  the  ancient 
barriers  of  insular  prejudice  and  exclusiveness. 

The  process  by  which  these  results  have  been  effected,  and 
the  consideration  of  what  has  still  been  left  incomplete,  must 
be  a  worthy  subject  of  careful  study ;  but  it  involves  so  great 
a  variety  of  topics,  and  so  wide  a  range  of  doubtful  or  dis- 


302  BRITISH   FINANCE   IN   181G. 

piited  conclusions,  that,  unless  rigidly  restricted  within  the 
proper  limits  of  the  regions  that  belong  purely  to  finance,  the 
discussion  would  soon  extend  itself  beyond  any  ordinary  ca- 
pacity of  endurance,  and  lose  the  interest  which  belongs  to  it 
of  furnishing  instruction  to  other  nations  placed  in  circum- 
stances more  or  less  similar. 


THE  LEGAL-TENDER  ACT.* 


History  of  the  Legal-Tende)'  Paper  Mmiey  issued  during  the 
great  Rebellion,  being  a  Loan  vtithout  Interest,  and  a  National 
Currency.  Prepared  by  Hon.  E.  G.  Spaulding,  Chairman 
of  the  Sub-Committee  of  Ways  and  Means  at  the  Time  the 
Act  was  passed.     Buffalo.     1869. 

Opinion  deliver-ed  in  tlie  Supreme  Court  of  the  United  States  hy 
Chief  Justice  Chase,  on  tlie  7th  of  Febricary,  1870,  in  Re- 
gard to  ilie  Construction  of  the  Legal-Tender  Act. 

DURING  the  Rebellion  the  United  States  armies  suffered 
many  disasters  in  the  field,  which  for  the  moment  were 
felt  as  direct  and  personal  misfortunes  by  every  loyal  citizen. 
So  strong  was  the  public  feeling  of  anger  and  astonishment, 
that  Congress  appointed  committees  of  investigation,  to  exam- 
ine into  the  causes  of  these  military  failures,  and  subjected  the 
whole  conduct  of  the  war  to  a  searching  and  sometimes  a  se- 
vere criticism.  In  finance,  on  the  other  hand,  the  nation  suf- 
fered only  one  great  disaster,  but  its  effects  have  extended  far 
beyond  the  period  of  the  war,  and  are  likely  to  be  felt  with 
unmitigated  force  for  an  indefinite  time  yet  to  come.  The 
causes  of  this  catastrophe  have  not  been  investigated  by  Con- 
gress ;  but  as  the  day  may  probably  arrive  when  the  national 
government  will  have  been  forced  to  accept  the  fact  that  the 
act  of  national  bankruptcy  was  a  calamity  so  ten-ible  as  to  in- 
volve the  personal  and  political  credit  of  every  man  in  whose 

*  From  the  North  American  Review  for  April,  1870. 


304  THE   LEGAL- TENDER   ACT. 

charge  the  people  had  then  placed  the  common  interests,  it 
may  be  useful  to  point  out  the  path  which  the  future  congres- 
sional committee  on  the  Conduct  of  the  Finances  will  be  com- 
pelled to  follow  in  investigating  the  causes  which  led  to  that 
miscarriage,  the  results  of  Avhich  have  far  exceeded  in  impor- 
tance the  defeat  of  any  of  the  national  armies  or  the  foilure  of 
any  campaign.  The  timid  and  hesitating  criticism  with  which 
the  subject  has  been  commonly  treated  speaks  ill  for  the  sound 
sense  of  tlie  community.  The  public  has  so  thoroughly  adopted 
the  idea  that  it  is  itself  the  responsible  governing  power,  and 
its  repi'esentatives  only  delegates  to  enroll  its  oi'ders,  that  the 
healthy,  process  of  criticising  a  policy  once  adopted  seems  to 
it  almost  an  attack  on  its  own  authority.  The  confusion  of 
ideas  involved  in  this  assumption  of  responsibility  is  peculiarly 
unfortunate.  The  task  of  citizens  who  are  selected  to  govern 
is  one  thing.  They  bear  the  burden  of  leaders,  and  they  en- 
joy the  honor.  They  are,  too,  at  liberty  to  excuse  or  palliate 
their  mistakes,  their  ignorance,  or  their  crimes  by  whatever 
argument  they  can  make  to  answer  their  purpose.  But  the 
task  of  the  public  is  wholly  different.  It  is  that  of  insisting, 
without  favor  or  prejudice,  on  the  observance  of  truth  in  legis- 
lation and  in  the  execution  of  the  laws.  To  apply  the  princi- 
ples of  truth  in  criticism  is  the  first  duty  of  every  writer  for 
the  press  and  every  speaker  on  the  hustings.  Whatever  seems 
harsh  in  criticism  or  vehement  in  temper  may  be  excused  in 
the  citizen  who  clings  to  the  rigid  logic  of  fundamental  princi- 
ples, and  who  leaves  to  those  whose  public  conduct  fails  to 
reach  his  standard,  the  labor  of  justifying  themselves  in  the 
best  way  they  can. 

It  is  customary,  however,  for  critics  of  American  finance  to 
begin  at  this  point  with  the  assumption  that  the  Legal-Tender 
Act  was  necessary  and  inevitable.  As  a  matter  of  criticism, 
nothing  can  be  more  absurd  than  such  a  beginning ;  and  as  a 
matter  of  intelligence,  nothing  can  be  feebler.  Congi'ess  and 
the  country  permitted  no  such  assumption  to  be  made  in  ex- 
cuse for  the  beaten  generals  at  Fredericksburg  and  Chancel- 
lors ville.    There  can  be  no  satisfactory  conclusion  from  sucii  a 


THE   LKGAL-TEXDER   ACT.  305 

premise.  No  sound  result  can  be  reached  except  by  assuming 
at  the  outset  that  the  Legal-Tender  Act  was  not  necessary  ; 
that  the  public  was  not  responsible  for  it ;  that  the  men  who 
made  it  law  were  answerable  to  the  people  for  their  act,  and 
are  bound  to  show  that  so  extraordinary  and  so  grave  a  mis- 
fortune could,  by  no  means,  have  been  avoided.  If  they  fail 
to  prove  their  case,  they  are  condemned.  It  is,  too,  a  matter 
of  the  greatest  consequence  to  decide  what  the  ultimate  judg- 
ment will  be,  since  on  it  must  turn  not  only  questions  of  the 
most  considerable  material  interests,  bvit  points  of  fundamental 
law  in  the  United  States,  and  of  the  theory  of  government  for 
future  time.  The  ui'gent  necessity  of  establishing  some  fixed 
principles  in  regard  to  this  disease  of  debased  currency  may 
be  measured  by  the  extent  of  the  disease  itself.  Russia,  Aus- 
tria, Turkey,  Italy,  Spain,  Brazil,  Japan,  and  an  indefinite 
number  of  smaller  communities,  besides  the  United  States, 
have,  to  day,  no  fixed  standard  of  value  in  domestic  exchanges. 
With  rare  exceptions,  no  government  that  has  once  debased  its 
standard  has  ever  restored  it,  except  through  the  desperate 
resource  of  partial  or  entire  repudiation.  Unless  the  world  is 
prepared  to  agree  that  society  has  no  protection,  and  that  the 
assumed  progress  of  political  science  is  a  mere  dream,  there 
can  be  no  excuse  for  continuing  to  accept  as  inevitable  an  evil 
which,  in  all  times,  has  been  merely  the  result  of  ignorance 
and  raisgovernment. 

The  law  of  legal  tender,  passed  by  Congress  in  February, 
18G2,  cannot,  therefore,  be  assumed  to  have  been  necessary, 
and  its  supporters  are  bound  to  prove  that  they  had  no  altei^ 
native.  To  this  taslc  Mr.  Spaulding,  the  principal  author  of 
the  measure,  has  applied  himself;  while,  on  the  other  hand, 
Mr.  Chase,  withoiit '  whose  assent  the  law  could  not  have 
passed,  has  assumed  the  contrary  ground.  There  is,  unfortu- 
nately, at  the  outset  a  strong  presumption  against  the  law, 
rising  from  the  unquestionable  fact  that  the  men  who,  in  1862, 
were  charged  with  the  conduct  of  the  finances,  and  were  re- 
sponsible for  this  law  in  particular,  had  no  claim  to  confidence 
on   the   ground  of  their  financial  knowledge  or  experience. 

T 


306  THE   LEGAL-TENDER   ACT. 

Something  better  might  indeed  have  been  expected  among  a 
people  so  devoted  to  commerce  and  so  hal)itiiated  to  self-gov- 
ernment. Military  disasters  were  to  be  looked  for,  seeing  that 
the  nation  had  no  training  nor  taste  for  war  ;  but  though  war, 
or  art,  or  philosophy,  or  abstract  knowledge,  were  beyond  the 
range  of  public  or  popular  interest,  an  experience  of  two  hun- 
dred years  ought  at  least  to  have  insured  the  country  against 
mistakes  in  practical  politics.  Such,  however,  Avas  very  for 
from  the  truth.  Among  the  leading  statesmen  then  charged 
with  responsibility,  not  one  was,  by  training,  well  fitted  to 
perform  the  duties  of  finance  minister,  or  to  guide  the  finan- 
cial opinions  of  Congress.  The  Secretary  of  the  Treasury, 
certainly  the  most  capable  of  the  men  then  connected  with 
finance,  suffered  severely  under  the  disadvantage  of  inexperi- 
ence. In  the  Senate,  finance,  like  evei'y  other  subject,  was 
treated  rather  as  though  it  were  a  branch  of  the  common  or 
constitutional  law,  than  as  though  it  were  a  system  with 
established  principles  and  processes  of  its  own.  But  it  was 
in  the  House  of  Representatives  that  the  want  of  education 
was  most  apparent  and  most  mischievous,  while,  by  a  signifi- 
cant coincidence,  it  happens  that  the  law  of  legal  tender,  more 
than  almost  any  other  great  financial  measure  of  the  Rebel- 
lion, was  peculiarly  and  essentially  the  work  of  this  House. 
As  for  the  members  who  originated  and  whose  activity  carried 
through  all  opposition  the  act  of  February,  1862,  it  is  difticult 
to  characterize  them  in  language  which  would  not  seem  un- 
duly and  unreasonably  severe.  Yet  it  may  honestly  bo 
dpubted  wlicther  there  has  ever  been  a  time  since  Kleon,  the 
leather-seller,  was  sent  by  the  people  of  Athens  to  command 
its  armies  at  Sphacteria  and  Amphipolis,  and  since  Aristophanes 
on  the  public  stage  covered  the  powerful  popular  leader  with 
an  immortal  ridicule  which  surely  reflected  most  severely  on 
the  Athenian  people  itself,  —  it  may  honestly  be  doubted 
whether  histoiy  records  an  occasion  when  the  interests  of  a 
great  country  in  an  extreme  emergency  have  been  committed 
to  hands  more  eminently  disqualified  for  the  trust.  In  Feb- 
ntarv,  1862,  Mr.  Thaddeus  Stevens  was  chairman  of  the  Com- 


THE   LEGAL- TENDER   ACT.  307 

mittee  of  Ways  and  Means,  from  which  emanates  the  ordinary 
financial  legislation  of  Congress.  To  say  that  Mr.  Stevens  was 
as  little  suited  to  direct  the  economical  policy  of  the  country 
at  a  critical  moment,  as  a  naked  Indian  from  the  plains  to 
plan  the  architecture  of  St,  Peter's  or  to  direct  the  construc- 
tion of  the  Capitol,  would  express  in  no  extreme  language  the 
degree  of  his  unfitness.  That  Mr.  Stevens  was  grossly  igno- 
rant upon  all  economical  subjects  and  principles  was  the  least 
of  his  deficiencies.  A  dogmatic  mind,  a  high  temper,  and  an 
overbearing  will  are  three  serious  disqualifications  for  financial 
success,  especially  when  combined  with  contempt  for  financial 
knowledge.  It  is  no  exaggeration  to  say,  that  every  quality 
of  his  nature  and  every  incident  of  his  life  which  gave  Mr. 
Stevens  power  in' the  House,  where  he  was  almost  omnipotent 
in  the  legislation  which  belonged  to  the  war  and  to  recon- 
struction, conspired  to  unfit  him  for  the  deliberate  and  diffi- 
cult discussions  of  finance.  But  it  is  not  to  Mr.  Stevens 
that  the  principal  burden  of  blame  or  praise  for  the  financial 
legislation  of  that  momentous  year  is  to  be  awarded.  In  the 
press  of  business  upon  the  committee,  when  in  the  brief 
space  of  a  few  months  the  whole  system  of  loans,  of  taxation, 
and  of  currency,  demanded  by  a  war  of  such  tremendous 
proportions,  had  to  be  created,  so  to  speak,  out  of  nothing, 
two  sub-committees  were  formed  to  divide  the  duties  which 
fell  upon  the  committee.  One  of  these,  under  the  lead  of  Mr. 
Morrill  of  Vermont,  undertook  to  enlarge  and  adjust  the 
scheme  of  taxation  to  the  new  necessities  of  the  government. 
The  other,  under  the  chairmanship  of  the  Hon.  Elbridge  G. 
Spaulding  of  New  York,  assumed  the  care  of  the  national  cur- 
rency, the  raising  of  loans,  and  the  issue  of  treasury  notes  or 
bonds.  Mr.  Stevens  remained  chairman  of  the  whole  commit- 
tee, charging  himself  particularly  with  the  matter  of  appi'o- 
priations,  and  lending  his  powerful  voice  to  both  sections  be- 
low him,  as  either  by  turn  encountered  opposition  in  forcing 
its  measures  through  the  House. 

The  intellect  of  a  Congressman,  gifted  with  no  more  than 
the  ordinary  abilities  of  his  class,  is  scarcely  an  interesting  or 


308  THE   LEGAL-TENDER  ACT. 

instructive  subject  of  study  ;  nor  are  the  discussions  that  arise 
among  such  men  likely  to  be  rich  in  stores  of  knowledge  or 
experience.  But  when  an  accidental  representative  is  able  to 
carry  "over  the  administration  and  through  Congress,"*  as 
Mr.  Spaulding  claims  to  have  done,  and  as  it  is  clear  that  Mr. 
Spaulding  did,  a  measure  of  such  far-reaching  consequences  as 
the  Legal-Tender  Act  of  1862,  the  character  of  that  person's 
mind  and  the  facts  of  his  life  cease  to  be  matters  of  insignifi- 
cance. One  may  well  inquire  what  sort  of  a  man  it  was  that 
could  lead  a  nation  so  far  astray,  and  what  the  condition  of 
things  that  made  it  possible  to  effect  results  of  such  magni- 
tude. Financiers  who  make  an  addition  of  hundreds  of 
millions  of  dollars  to  the  debts  of  their  countries,  represent- 
ing not  a  penny  of  value  enjoyed,  are  entitled  to  a  place  in 
history,  whether  they  boast  the  intellectual  capacity  of  Mr. 
Pitt  or  of  Mr.  Spaulding. 

Unlike  Mr.  Stevens,  Mr.  Spaulding  had  the  advantage  or 
disadvantage  of  a  certain  sort  of  financial  experience.    He  had 
been  for  a  time  treasurer  of  the  State  of  New  York.     By  pro- 
fession he  was,  in   1862,  president  of  a  joint-stock  bank  at 
Buffiilo,  and  it  was  on  this  circumstance  that  he  based  his 
chief  claim  to  speak  as  an  expert  in  finance.     At  the  confer- 
ence on  the  11th  of  January,  1862,  at  the  treasury,  between 
the  Secretary,  the  committees  of  Congi'ess,  and  the  representa- 
tives of  the  principal  Northern  banks,  —  a  conference  whose 
momentous   importance   will  require    close   attention,  —  Mr. 
Spaulding  cxjiressed  his  convictions  both  "as  a  banker  and 
legislator."    The  association  of  functions  was  not  unimportant, 
and  Mr.  Spaulding  was  right  in  laying  stress  upon  it.     Had  he] 
not  been  a  banker  as  well  as  a  legislator,  the  Legal-Tender  Act  i 
might,  it  is  not  improbable,  never  have  been  enacted.     Beingj 
a  provincial  banker,  and  at  the  same  time  chairman  of  a  sub-j 
committee   dealing  with  the   nominally  financial  but  really! 
universal  interests  of  thirty  millions  or  more  of  citizens,  and 
deahng,  t(jo,  witli  the  whole  future  of  a  nation  whose  develop- 

*  Mr.  Spaulding's  share  in  the  passajto  of  tlie  Bill  is  described  in  these  words 
by  his  collea«ue,  Hon.  T.  M.  I'omeroy,  in  a  speech  delivered  in  the  House  of* 
KepresenJiitivfs  nn  thp  19th  Febi-nary,  1862. 


THE   LEGAL-TENDER    ACT.  3CJ9 

ment  no  bounds  seem  to  limit,  Mr.  Spaiilding  naturally  pro- 
ceeded to  apply  to  the  necessities  of  the  situation  the  princi- 
ples of  finance  which  he  had  learned  in  shaving  notes  at  a 
country  bank. 

These  necessities  were  unquestionably  serious,  but  few  per- 
sons now  retain  any  distinct  recollection  of  their  actual  shape. 
To  the  minds  of  men  living  in  1870  the  events  of  18G2  appear 
bound  up  in  close  connection  with  the  long  series  of  events 
that  have  intervened.  The  necessity  of  the  Legal-Tender  Act 
is  now  assumed,  not  on  account  of  what  had  happened  before 
the  law  was  passed,  nor  on  account  of  anything  that  was  fore- 
seen by  its  authors,  but  because  of  what  afterwards  occurred, 
the  exigencies  of  a  situation  fai*  more  difficult  and  alarming 
than  existed  at  that  eai'lier  time.  Against  such  a  confusion 
of  ideas  it  is  necessary  that  every  candid  man  should  be  on 
his  guard.  The  vague,  general  notion  that,  sooner  or  later, 
legal-tender  paper  was  inevitable,  is  a  part  of  the  same  loose 
and  slovenly  popular  criticism  with  which  the  whole  subject 
has  been  so  habitually  treated,  and  is  scarcely  worth  comment ; 
but  the  actual  circumstances  under  which  Congress  declared 
the  measure  to  be  necessary  are  a  matter  of  fact,  and  it  is  with 
these  that  law,  history,  and  political  science  have  first  of  all 
to  deal. 

Congress  met  on  the  2d  of  December,  1861,  and  the  Seci-e- 
tary  immediately  set  before  it  an  account  of  the  financial 
situation,  and  his  own  scheme  for  supplying  tJie  wants  of  the 
trcasuiy.  He  required  about  $200,000,000,  in  addition  to  re- 
sources already  provided,  in  order  to  meet  the  demands  of  the 
next  half-year.  His  immediate  necessity  was  for  $  100,000,000 
within  three  months.  He  estimated  that  the  debt  would 
reach  $517,000,000  on  the  1st  of  July,  1862,  and  that  a  year 
later  it  would  probably  become  $900,000,000.  In  fact  it  rose 
to  $1,100,000,000.  A  part  of  the  heavy  government  ex- 
penses were  to  be  met  by  taxation;  a  part  by  the  sale  of 
bonds ;  and  for  the  rest  Mr.  Chase  proposed  the  assumption 
by  the  government  of  the  bank  circulation,  amounting  to  some 
$200,000,000,  with  a  view  not  only  of  obtaining  the  money, 


310  THE   LEGAL-TENDER    ACT. 

but  of  providing  a  sound  currency  on  which  to  conduct  the 
war.  The  Secretary  did  not,  in  this  connection,  overlook  the 
possibility  of  resorthig  to  a  forced  paper  circulation,  but  "  the 
immeasurable  evils  of  dishonored  public  faith  and  national 
bankruptcy  "  deterred  him  from  recommending  the  measure, 
or  rather  obliged  him  to  reject  it  as  dangerous  and  unneces- 
sary. 

Thus,  on  the  1st  of  December,  1861,  according  to  the  Sec- 
retary of  the  Treasury,  no  occasion  existed  for  resorting  even 
to  the  moderate  measure  of  issuing  government  paper  at  all, 
except  so  far  as  concerned  a  possible  guaranty  to  a  new  bank 
circulation.  The  idea  of  legal  tender  was  expressly  rejected. 
The  government  believed  itself  able  to  meet  its  demands  on 
the  basis  of  the  bank  circulation,  provided  Congi-ess  would 
place  the  bank  cii-culation  on  an  available  footing.  Nothing, 
however,  was  done  by  Congress  towards  supplying  the  wants 
of  the  treasury,  until,  towards  the  end  of  December,  Mr. 
Spaulding  began  to  draft  a  bill  for  establishing  a  national 
banking  currency.  While  preparing  this  draft,  Mr.  Spaidding, 
"  upon  mature  reflection,  came  to  the  conclusion  that  the  bill 
could  not  be  passed  and  made  available  quick  enough  to  meet 
the  crisis  then  pressing  upon  the  government  for  money  to 
sustain  the  army  and  navy.  He  therefore  drafted  a  legal- 
tender  treasury  note  section."  This  was  done  about  the  30th 
December ;  and  this  was  the  origin  of  the  measure  destined 
to  have  so  vast  and  permanent  an  influence  on  the  American 
people.  The  "  mature  reflection  "  of  Mr.  Spaulding  co\ild  dis- 
cover no  other  or  better  method  of  supplying  a  temporary 
want  of  $  100,000,000,  than  a  resort  to  the  last  expedient 
liuown  to  finance ;  what  he  himself  calls  a  forced  loan,  made 
in  the  firet  year  of  the  war  by  means  which  were  equivalent 
to  a  debasement  of  the  standard  of  value  and  a  bankruptcy 
of  the  government.  It  is  scarcely  necessary  to  add  a  com- 
ment upon  this  simple  statement.  Any  reader  in  the  least 
familiar  with  financial  history  must  ajjjjreciate  the  extrava- 
gance of  Mr.  Spaulding's  assumptiou.  That  he  acted  with! 
perfect  honesty  and  good  intention  no  one  will  think  it  worth  ] 


THE   LEGAL-TENDER   ACT.  311 

while  to  dispute ;  but  that  he  had  the  least  conception  of  the 
consequences  of  what  he  was  doing,  or  that  he  grasped  even  in 
a  limited  degree  the  principles  of  statesmanship,  no  unpreju- 
diced or  cool  observer  could  imagine.  Like  all  ignorant  men, 
impatient  of  resistance  or  restraint,  the  moment  he  saw  an 
obstacle,  he  knew  but  one  resource,  that  of  a  blind  and  reck- 
less appeal  to  force. 

Mr.  Spaulding  then,  "upon  more  mature  consideration," 
converted  this  section  into  a  separate  bill,  and  laid  it  before 
his  committee.  The  committee,  however,  was  by  no  means 
unanimous  in  accepting  Mr.  Spauldiug's  views  of  necessity. 
It  is  true,  and  it  is  an  interesting  fact,  that  the  only  doubt 
entertained  by  Mr.  Thaddeus  Stevens  was  in  regard  to  the  con- 
stitutionality of  the  law ;  and  one  is  somewhat  at  a  loss 
whether  most  to  wonder  at  the  profound  ignorance  thus  be- 
trayed or  at  the  constitutional  scruples  which  suggested 
themselves  to  this  veteran  expunger  of  constitutions.  But 
though  Mr.  Stevens  and  one  half  the  committee  approved  the 
bill,  the  other  half  stood  out  firmly  against  it,  and  only  as  a 
matter  of  courtesy  allowed  it  to  be  reported  to  the  House. 

On  the  7th  of  January,  1862,  the  bill  was  reported.  It  au- 
thorized the  issue  of  $100,000,000  in  treasury  notes,  to  be  a 
legal  tender,  and  exchangeable  on  demand  for  six  per  cent 
bonds.  Public  opinion  at  once  became  sharply  divided  on  the 
merits  of  the  measure.  Delegates  from  the  Boards  of  Trade 
and  banks  of  the  principal  Northern  cities  appeared  in  Wash- 
ington to  oppose  the  bill,  and  on  the  11th  of  January  these 
gentlemen  met  the  Secretary  of  the  Treasury  and  the  finance 
committees  of  the  Senate  and  House,  at  Mr.  Chase's  ofiice  in 
the  department.  Here  the  whole  financial  policy  of  the  gov- 
ernment was  made  a  subject  of  discussion,  and  the  two  paths 
between  which  the  country  was  still  at  liberty  to  choose  were 
marked  out  with  unmistakable  precision.  Mr.  Spaiilding,  on 
the  one  hand,  insisted  not  onW  that  his  measure  was  the  best, 
but  that  it  was  the  only  means  of  raising  the  money  required, 
and  he  demanded  to  know  what  alternative  could  be  siiggested. 
On  the  part  of  the  baak  committees  Mr.  James  Gallatin  of 


312  THE   LKGAL-TENDER   ACT. 

New  York,  submitted  a  complete  financial  scheme,  and,  with 
the  plain  common  sense  of  a  practical  man,  replied  to  Mr. 
Spauldiug's  inquiry  with  the  simple  proposal  that  the  govern- 
ment should  sell  its  bonds  in  the  open  market  for  what  they 
would  bring,  without  limitation  of  price.  To  this  suggestion 
Mr.  Spaulding  made  the  following  reponse  :  — 

"  The  Sub-Committee  of  Ways  and  Means,  through  Mr.  Spauldin^f, 
objected  to  any  and  every  form  of '  shinning'  by  government  through 
Wall  or  State  Streets,  to  begin  with ;  objected  to  the  knocking  down 
of  government  stocks  to  seventy-five  or  sixty  cents  on  the  dollar, 
the  inevitable  result  of  throwing  a  new  and  large  loan  on  the  mar- 
ket without  limitation  as  to  price ;  claimed  for  treasury  notes  as 
much  virtue  of  par  value  as  the  notes  of  banks  which  have  suspended 
specie  payments,  but  which  yet  circulate  in  the  trade  of  the  North  ; 
and  finished  with  firmly  refusing  to  assent  to  any  scheme  ivhir.h  should 
permit  a  speculation  by  brokers,  bankers,  and  others  in  the  government 
securities,  and  particularly  any  scheme  which  shotdd  double  the  public 
debt  of  the  country,  arid  double  the  expenses  of  the  war,  by  damaging 
the  credit  of  the  government  to  the  extent  of  sending  it  to  '  shin ' 
through  the  shaving-shops  of  New  York,  Boston,  and  Philadelphia. 
He  affirmed  his  conviction  as  a  banker  and  legislator,  that  it  was 
the  lawful  policy  as  well  as  the  manifest  duty  of  the  government,  in 
the  present  exigency,  to  legalize  as  tender  its  fifty  millions  issue  of 
demand  trejisury  notes,  authorized  at  the  extra  session  in  July  last, 
and  to  add  to  this  stock  of  legal  tender,  immediately,  one  hundred 
millions  more.  He  thought  that  thit  financial  measure  would  carry 
the  country  through  the  war,  and  sarre  its  credit  and  dignify.  At  the 
same  time  we  should  insist  upon  taxation  abundantly  ample  to  jiay 
the  expenses  of  the  government  on  a  peiicc  footing,  and  interest  of 
every  dollar  of  the  public  obligation,  and  to  give  this  generation  a 
clear  show  of  a  speedy  liquidation  of  the  public  debt." 

Before  commenting  further  upon  this  speech,  it  is  necessary 
to  mark  with  care  the  fact  that,  throughout  the  whole  legal- 
tender  contest  in  1862,  there  was  no  question  involved  but 
that  of  resource.  The  sum  of  one  hundred  million  dollars  was 
wanted  to  carry  on  the  government,  and  Mr.  Spaulding  cl<)se<l 
every  mouth  by  asking  how  else  the  money  could  be  raised, 
since  the  banks  ccndd  provide  no  more  coin  and  tlieir  paj)cr 
would  not  properly  answer  the  puriwse.     At  this  time  there 


THE   LKGAL-TENDER   ACT.  313 

was  no  tliought  of  any  ultei'ior  process  of  "  floating  the  bonds," 
which  became  the  ultimate  fmiction  of  the  legal-tender  paper, 
and  indeed  this  argument,  which  implied  an  intentional  depre- 
ciation of  the  paper,  would  in  18G2  have  scarcely  worked  in 
favor  of  the  bill.  How  little  weight  was  put  on  the  idea  of 
"  making  money  easy  "  is  evident  from  the  whole  debate,  but 
so  far  as  Mr.  Spaulding  is  concerned,  the  following  letter, 
written  on  the  8th  of  January,  1862,  is  a  sufficiently  clear 
statement :  — 

"  Dear  Sir,  —  In  reply  to  yours  of  the  4th  instant,  I  would  say 
that  the  Treasury  Note  Bill  for  $  100,000,000  agreed  upon  in  com- 
mittee yesterday  is  a  measure  of  necessity  and  not  one  of  choice.  You 
criticise  matters  very  freely,  and  very  likely  you  may  be  right  in 
what  you  say.  We  will  be  out  of  means  to  pay  the  daily  expenses 
in  about  thirty  days,  and  the  committee  do  not  see  any  other  way  to 
get  along  till  we  can  get  the  tax-bills  ready,  except  to  issue  tempo- 
rarily treasury  notes.     Perhaps  you  can  suggest  some  other  mode 

of  carrying  on  the  government  for  the  next  one  hundred  days 

It  is  much  esisier -to  find  fardt  than  it  is  to  suggest  practicable  means 
or  measures.  We  must  have  at  least  $  100,000,000  of  paying  means 
during  the  next  three  months,  or  the  government  must  stop  pay- 
ment  I  will  thank  you  to  suggest  a  better  practicable  mode  of 

getting  .$  100,000,000  of  paying  means  during  the  next  three  months. 
I  would  be  glad  to  adopt  it,  and  the  committee  would  be  glad  to 
adopt  it.  Let  us  have  your  specific  plan  for  this  purpose,  one  that 
will  produce  the  money,  and  we  will  be  very  much  obliged  to  you." 

This  curious  letter,  which,  strange  to  say,  Mr.  Spaulding 
has  actually  published,  italics  and  all,  as  a  meritorious  docu- 
ment, tells  the  whole  story  of  the  legal  te'nder  in  its  origin. 
As  a  specimen  of  American  finance  and  congressional  ability 
it  will  live  in  history.  It  presents  the  view  on  which,  then  as 
now,  the  adherents  of  this  measure  have  always  wished  to 
place  it  before  the  public,  —  as  the  only  alternative  to  the  im- 
mediate stoppage  of  government.  Not  as  a  means  of  supply- 
ing currency,  nor  of  easing  the  money  market,  nor  of  "  float- 
ing "  bonds,  was  the  legal-tender  paper  first  created,  but  solely 
to  supply  a  temporary  want  of  $  100,000,000,  without  which 
the  treasury  must  stop  payments.  And  Mr.  Spaulding  flung 
U 


o;^4  THE    LEGAL-TENDER    ACT. 

into  the  face  of  eveiy  doubter  liis  contempttious  request  to 
suggest  some  better  mode  of  raising  the  money,  or  in  future 
to  keep  silence. 

Three  days  after  this  letter  was  written,  Mr.  Gallatin,  on 
the  part  of  the  New  York  banks,  replied  to  Mr.  Spaulding's 
entreaties  by  the  simple  and  business-like  remark  of  a  man 
who  knew  what  he  was  talking  about,  that  it  was  only  neces- 
sary for  Mr.  Chase  to  sell  his  bonds  at  their  market  value,  and 
obtain  what  money  he  wanted.  To  this  suggestion  Mr. 
Spaulding  wtxs  called  upon  for  a  rejoinder.  Obviously  he  was 
bound  to  show  that  Mr.  Gallatin  was  mistaken  ;  that  no  such 
alternative  really  existed ;  and  that  it  was,  for  some  reason  or 
other,  impossible  to  sell  the  government  bonds  in  the  way 
proposed.  In  the  speech  which  has  just  been  quoted  Mr. 
Spaulding  did  imdertake  to  answer  Mr.  Gallatin,  but  he  took 
no  such  ground  as  this.  He  did  not  deny  the  efficacy  of  the 
proposed  measure.  He  did  not  even  question  the  fact  that 
the  resource  suggested  was  both  simple  and  easy.  He  only 
appealed  to  the  dignity  of  the  govennnent. 

It  appears,  therefore,  that  there  was  an  alternative  to  legal 
tender,  in  spite  of  Mr.  Spaulding's  assertions  that  thbre  was 
none.  What  this  alternative  consisted  in  will  be  discussed  in 
a  moment ;  but  as  the  point  is  most  material  in  the  argument, 
it  will  be  well  to  establish  here  beyond  dispute  the  fact  that 
the  existence  of  this  alternative  was  acknowledged  by  the  sup- 
porters of  the  bill  almost  in  tlie  same  breath  with  which  they 
declared  legal  tender  to  be  a  necessity.  In  his  speech  of  the 
28th  January,  on  introducing  the  bill  in  the  House  of  Repre- 
sentatives, Mr.  Spaulding  sjiid  :  — 

"  The  bill  before  us  is  a  war  measure,  a  measure  of^ necessiti/,  and  not 

of  choice We  have  the  alternative  eitlier  to  go  into  the  market 

and  sell  our  bonds  for  what  they  will  command,  or  to  pass  this 

bill If  you  offer  to  tlie  people  and  put  upon  the  market 

%  300,000,000  to  the  highest  bidder  in  the  present  state  of  affairs, 
they  would  not  be  taken  except  at  ruinous  rates  of  discount.  .... 
I  fear  the  twenty  years  9\\  per  cent  bonds  would  under  the  pressure 
fall  to  75,  70,  60  and  even  50  cents Why,  then,  go  into  the 


THE   LEGAL-TENDER   ACT.  315 

streets  at  all  to  borrow  money !  I  prefer  to  assert  the  power  and 
dignity  of  the  government  by  the  issue  of  its  own  notes." 

Mr.  Hooper,  who  was  second  on  Mr.  Spaulding's  committee, 
said :  — 

"The  propositions  of  committees  from  boards  of  trade  and  banks, 
which  recently  visited  Washington,  differed  from  the  theory  of  this 
bill  so  far  as  to  require  that  ....  the  government  bonds  must  first 
be  disposed  of,  and  the  money  received  for  them  paid  to  the  con- 
tractors  The  obvious  effect  of  such  an  arrangement  would 

be  to  put  the  reins  of  our  national  finances  in  the  hands  of  the 

banks To  render  the  government  financialli/  more  independent, 

it  is  necessary  to  make  the  United  States  notes  a  legal  tender.  It 
is  possible  that  they  ivoidd  become  a  practical  tender  ivithoid  provid- 
ing/or them  to  be  a  legal  tender." 

The  alteniative,  therefore,  as  seen  by  Mr.  Hooper,  was  not 
between  legal  tender  and  a  stoppage  of  payments,  but  between 
legal  tender  and  dependence  on  the  banks.  Mr.  Bingham's 
idea  of  necessity  was  only  a  little  more  ridiculous  :  — 

"  Great  names,"  said  Mr.  Bingham,  '•  have  been  invoked  [against 
legal  tender]  in  this  debate.  For  what  purpose  ?  For  the  purpose 
of  laying  at  the  feet  and  at  the  mercy  of  brokers  and  hawkers  on 
'Change,  the  power  of  the  people  over  their  monetary  interests  in 
this  hour  of  their  national  exigency." 

Mr.  Thaddens  Stevens,  again,  had  views  of  his  own  in  re- 
gard to  the  meaning  of  the  word  "  necessity  "  :  — 

"  This  bill,"  said  he,  "  is  a  measure  of  necessity,  not  of  choice 

Here,  then,  in  a  few  words  lies  your  choice.  Throw  bonds  at  six  or 
seven  per  cent  on  the  market  between  this  and  December  enough 
to  raise  at  least  $  000,000,000,  or  issue  United  States  notes.  .  .  ., . 
I  maintain  that  the  highest  sum  you  could  sell  your  bonds  at  would 
be  seventy-five  per  cent,  payable  in  currency  itself  at  a  discount. 
That  would  produce  a  loss  which  no  nation  or  individual  doing  a 
large  business  could  stand  a  year." 

Senator  Sherman  also  used  the  word  "  necessity  "  in  a  sense 
which  would  have  been  ludicrous  if  the  subject  had  concerned 
the  metaphysical  doctrine  of  fate  and  free  will :  "  We  must  no 
longer  hesitate  as  to  the  necessity  of  this  measure.  That  ne- 
cessity does  e.vist,  and  now  presses  upon  us.     I  rest  my  vote 


316  THE  legal-tendp:r  act. 

upon  the  proposition  that  this  is  a  necessaiy  and  proper  meas- 
ure to  furnish  a  currency.'"  A  more  amusing  example  of  anti- 
chmax  than  this  is  seldom  seen  in  rhetoric. 

It  would  be  pleasant  to  linger  over  this  subject,  and  enjoy 
among  these  apparently  tedious  speeches  the  delicate  touches 
of  involuntary  humor  which  a  critic  finds  so  difficult  to  resist, 
but  it  is  useless  to  accumulate  evidence  of  a  point  that  is  self- 
evident  ;  and  it  is  unquestionable  that  even  the  strongest  sup- 
porters of  the  bill  did  not  in  any  true  and  absolute  sense 
maintain  that  legal  tender  was  necessary,  but  only  that  it 
was  preferable  to  the  process  of  selling  bonds  at  a  discount 
and  retaining  the  old  bank  currency.  The  next  step,  thei-e- 
fore,  must  lead  to  some  closer  discussion  of  this  opinion,  and 
of  the  financial  principles  by  which  its  justice  can  alone  be 
tested. 

Finance  is  a  subject  which  the  liveliest  writer  may  well 
despair  of  making  popular,  since  the  mere  sight  or  suspicion 
of  it  is  alone  enough  to  cause  every  reader,  except  the  dullest, 
to  close  the  most  promising  volume.  A  writer,  therefore,  can 
have  no  hope  of  gaining  a  general  hearing  on  such  a  topic. 
Rarely  can  he  expect  sympathy  among  even  business  men, 
unless  he  adopts  the  views  they  hold.  Yet  notwithstanding 
this,  it  is  and  will  remain  true,  and  not  only  true  but  inter- 
esting, that  in  the  large  experience  of  modem  nations,  some 
few  solid  principles  in  finance  have  been  established  too  firmly 
to  be  shaken  ;  and  whether  or  no  busy  politicians  or  local 
bankers  choose  to  believe  them,  and  whether  or  no  the  ordi- 
nary reader  choose  to  listen  to  them,  the  principles  are  sound 
and  will  hold. 

Hitherto  in  human  history,  the  mind  of  man  has  succeeded 
in  conceiving  of  but  two  means  by  which  governments  can 
obtain  money.  One  of  these  is,  to  take.  The  other  is,  to 
boiTow.  The  hybrid  and  self-contnidictory  notion  of  a  forced 
loan  resolves  itself  ultimately  into  one  or  the  other  of  these 
conceptions,  and  as  a  permanent  policy  is  impossible.  In 
practice,  where  a  government  does  not  take,  it  must  borrow. 

Almost  all  modern  nations  are,  to  a  greater  or  less  extent, 


THE   LEGAL-TENDER   ACT.  317 

habitual  borrowers  so  far  as  their  governments  are  concerned, 
and  therefore  it  is  natural  that,  during  two  hundred  years  of 
experience,  the  principles  which  regulate  loans  should  have 
been  studied  with  some  care,  and  simplified  in  some  degree 
into  a  science.  After  innumerable  costly  experiments  and 
elaborate  study  of  the  interests  and  motives  of  lenders  and 
borrowers,  the  effect  of  complicated  financial  schemes  and 
special  pledges  and  conditions,  it  seems  to  be  now  acknowl- 
edged by  the  shrewdest  governments  that  the  simplest  bargain 
is  the  best  for  the  public,  and  that  all  financial  tricks  and  de- 
vices, all  attempts  to  coax  or  deceive  capitalists  into  better 
conditions  than  they  are  ready  to  offer,  in  the  end  injure  only 
the  government  and  the  public.  Simplicity  has,  therefore, 
of  late  years  been  carried  by  the  great  borrowing  nations  to  a 
degree  of  scientific  perfection  beyond  which  there  seems  to  be 
no  possibility  of  passing.  According  to  this  principle,  govern- 
ments now  sell  their  own  credit  without  stipulation,  reserve, 
or  condition.  They  sell,  for  example,  their  simple  promise  to 
pay  a  thousand  dollars  a  year  so  long  as  it  is  demanded.  To 
this  promise  no  condition,  expressed  or  implied,  is  attached, 
except  that  the  payment  of  a  nominal  principal  may  at  any 
time  discharge  the  debt.  For  this  promise  they  obtain  what- 
ever they  can,  and  experience  has  proved  that,  in  the  compe- 
tition of  the  world,  the  bargain  thus  struck  is  for  both  parties 
the  fairest. 

Another  simple  law  has  also  been  established,  and  this  is 
that  lenders  will  always  prefer  and  pay  most  for  a  security  on 
which  there  is  a  certainty  of  permanence  or  a  chance  of  profit, 
other  things  being  equal ;  that  is  to  say,  that  a  security  is  rel- 
atively less  valuable  as  it  approaches  its  par  and  its  redemp- 
tion than  it  should  be,  judging  from  the  price  paid  for  an 
exactly  similar  security  which  has  a  better  chance  of  perma- 
nence or  a  wider  limit  of  possible  profit.  The  English  3  per 
cents  at  eighty  would  commonly  have  a  marked  advantage  in 
the  markets  over  3^  per  cents ;  in  the  first  place,  because  the 
margin  of  possible-  profit  would  be  greater,  and  in  the  second 
place,  because  there  would  be  no  prospect  of  disturbance  iu 


318  THE   LEGAL-TENDER   ACT. 

the  one  case,  while  in  the  other  redemption  would  be  near  at 
hand.  Experience,  therefore,  shows  that  governments  as  a 
rule  obtain  relatively  a  low  price  for  a  security  which  they 
insist  upon  selling  at  par. 

This  obvious  fact  induces  most  governments  to  adapt  their 
offer  to  the  market  in  such  a  way  as  to  combine  these  induce- 
ments. If  the  market  rate  of  interest  is  at  4  per  cent,  they 
commonly  offer  3|  or  3  per  cent,  and  thus  dispose  of  their 
credit  at  a  discount  on  better  terms  than  if  they  attempted 
to  outbid  the  market  rate.  The  American  government,  on  the 
other  hand,  has  commonly  pursued  a  different  course.  While 
insisting  that  it  will  borrow  only  at  the  market  rate,  that  is, 
at  par,  it  has  found  itself  compelled  to  concede  something  in 
order  to  be  allowed  to  borrow  at  all.  In  the  first  place  it  has 
to  concede  a  high  rate  of  interest,  but  even  this  is  not  enough. 
Lenders  require  permanence.  It  accepts,  therefore,  the  con- 
dition that  it  shall  not  attempt  to  redeem  its  bonds  until  after 
the  lapse  of  a  term  of  yeai-s,  —  five  or  ten,  or  whatever  may 
be  agreed  upon.  The  expedient  is  clumsy,  but  the  ignorant 
prejudice  against  usury  compels  its  adoption,  although,  like 
all  such  devices,  it  works  in  practice  only  against  the  public 
interest  and  in  favor  of  the  capitalist.  Another  condition, 
however,  to  which  the  United  States  government  is  in  the 
habit  of  pledging  itself  is  entirely  gratuitous.  This  is  the  ob- 
ligation to  redeem  after  a  certain  number  of  years,  —  an  obli- 
gation which  works  wholly  against  the  public  interest,  and 
which  is  without  excuse  on  financial  grounds,  although  the 
incessant  enforcement  of  a  temporary  character  in  the  national 
debt  is  considered  its  excuse  from  a  political  stand-point. 

Every  established  principle  of  finance,  therefore,  indicated 
that  govennnent  credit  could  be  sold  to  more  advantage  at 
a  certain  nominal  discomit  than  if  a  higher  interest  or  any 
equivalent  condition  were  insisted  upon  in  order  to  "  float "  it 
at  par.  If,  therefore,  the  govenmient  had  chosen  to  authorize 
the  sale  of  six  per  cent  bonds  at  their  market  price,  omitting 
from  the  contract  all  restriction  on  its  own  free  control  over 
them,  it  would  have  done  precisely  what  all  established  finan- 


THE   LEGAL-TENDER   ACT.  319 

cial  rules  enjoin,  and  for  such  bonds  it  would  unquestionably 
have  obtained  the  best  terms  which  were  then  to  be  had,  while 
at  the  present  day  the  nation  would  have  owed  a  homogeneous 
debt,  with  which  it  would  have  been  free  to  deal  as  it  chose. 
Mr.  Spaulding,  however,  apparently  imagined  that  he  had  dis- 
covered some  new  principle  in  finance,  by  which  the  govern- 
ment might  raise  money  through  a  process  which  should  be 
neither  taxation  nor  loan.  Before  three  years  had  passed  the 
government  was  selling  its  six  per  cent  bonds  at  a  rate  equiv- 
alent to  very  nearly  thirty-five  cents  on  the  dollar;  but  at 
this  time  the  idea  of  its  credit  selling  at  a  discount  of  twenty 
or  thirty  or  forty  per  cent  was  so  revolting  to  Congress  that 
it  was  not  even  to  be  entertained.  Mr.  Gallatin  talked  in  vain. 
Nor  was  it  Mr.  Spaulding  and  members  of  Congress  alone  who 
were  extravagant  on  this  theme.  At  least  one  gentleman  who 
should  have  known  better,  —  Mr.  Moses  H.  Grinnell  of  New 
York,  —  encouraged  the  same  delusion.  "  As  for  G[allatin] 
and  a  few  egotistical  gentlemen  that  act  with  him,  they  should 
be  driven  out  of  Washington,  as  they  only  embarrass  the  gov- 
ernment. There  are  not  eight  bank  presidents  that  side  with 
G[allatin].  He  is  an  odd  fish,  —  has  very  little  influence  here." 
These  were  the  terms  used  by  Mr.  Grinnell  in  a  letter  dated 
the  30th  January,  1862,  and  it  was  a  curioiis  sign  of  the  times 
that  the  only  man  who  seems  to  have  had  a  clear  and  practi- 
cal knowledge  of  what  the  occasion  required  should  have  really 
been  "  an  odd  fish." 

But  it  is  not  enough  to  show  that  this  idea  about  "  shin- 
ning "  thi'ough  Wall  Street  was  almost  inconceivably  absurd, 
seeing  that  every  government  always  does  and  always  must 
borrow  on  the  best  terms  it  can  get,  or  not  borrow  at  all,  in 
which  case  it  can  have  no  resource  but  to  tax.  The  event 
soon  showed  that  the  men  who  treated  so  contemptuously  the 
idea  of  the  nation's  credit  being  sold  at  a  discount  were  the 
first  to  convert  this  same  legal-tender  paper  into  the  instru- 
meut  by  which  the  government  was  to  "shin,"  not  only 
thi'ough  Wall  Street  during  the  short  emergency  of  the  war, 
but  through  eyery  lane,  and  alley  of  the  land  during  a  period 


320  THE  LEGAL-TENDER   ACT. 

that  now  seems  interminable.  Congress  and  the  government 
followed  Mr.  Spaulding's  doctrine,  that  the  nation's  credit  must 
not  be  sold  at  a  discount,  and  the  result  was  that,  as  the  laws 
of  society  ai-e  inflexible,  while  the  laws  of  Congress  are  not 
omnipotent,  there  ensued  a  period  of  "  shinning  "  which  has 
seldom  had  a  parallel.  The  dollar  which  Congress  had  set  up 
was  "  shaved  "  through  Wall  Street  at  twenty,  thirty,  forty, 
fifty,  and  sixty  cents  discount.  Europe  bought  the  United 
States  six  per  cents  at  about  thirty-five  cents  on  the  dollar, 
notwithstanding  Mr.  Stevens's  asseverations  that  no  nation 
conld  afford  to  borrow  at  seventy  without  being  ruined  in  a 
year.  But  if  Mr.  Spaulding  and  his  friends  could  have  fore- 
seen, not  only  that  the  government  would  be  compelled  to 
perform  this  process  of  "shinning"  during  four  long  years, 
but  that,  thanks  to  them  and  to  them  alone,  the  government 
credit  and  its  broken  promises-to-pay  would  for  years  longer 
be  hawked  about  Wall  Street  at  whatever  price  they  could 
command,  and  would  become  the  support  by  which  Mr.  Jay 
Gould  and  Mr.  James  Fisk,  Jr.,  and  their  like,  would  succeed 
in  bolstering  up  their  scandalous  schemes  against  the  pressure 
of  sound  economical  laws,  the  statesmen  of  1862  might  per- 
haps have  gained  more  sensible  ideas  in  regard  to  the  treat- 
ment of  government  credit. 

In  justice  to  the  Secretary  of  the  Treasury,  it  must  be  said 
that,  on  the  day  of  the  conference,  he  showed  no  symptom  of 
yielding  to  Mr.  Spaulding's  influence.  He  remained  then  aa 
before  hostile  to  the  principle  of  legal  tender,  and  before  the 
bank  delegates  left  Washington  he  succeeded  in  agreeing  with 
them  upon  a  new  financial  armngement  which  included  the 
adoption  of  his  policy  in  regard  to  the  bank  currency,  and  re- 
jected the  resort  to  legal  tender.  Nor  would  it  perhaps  have 
affected  the  success  of  his  scheme,  that  Mr.  Spaulding  and  his 
committee  deemed  it  inadequate  and  withheld  their  assent. 
There  was  a  different  rejvson  than  this,  which  caused  the  com- 
promise between  Mr.  ('base  an<l  the  banks  to  fail.  The  gentle- 
man who  represented  the  Boston  banks  on  that  occasion  found 
on  his  return  to  Massachusetts  that  the  arrangement  he  had 


THE  LEGAL-TENDER  ACT.  321 

made  was  not  satisfactory  to  them,  and  he  at  once  telegraphed 
this  information  to  the  Secretary.  Then  for  the  fii'st  time  Mr. 
Chase  yielded  his  better  judgment,  and,  relying  on  his  own 
power  and  will  to  control  the  issues,  accepted  the  policy  of 
legal  tender,  for  which  Boston  influence  thus  became  im- 
mediately answerable.  Having  once  made  his  determination 
to  adopt  the  policy,  the  Secretary  was  not  a  man  to  hesitate 
in  carrying  it  out.  He  had  been  drawn  into  it  against  his 
most  deeply  rooted  convictions  and  his  better  judgment,  but 
no  sooner  was  the  decision  made  than  he  threw  his  whole 
weight  in  favor  of  the  bill. 

Thus,  in  spite  of  the  treasury  and  the  banks  and  the  active 
remonstrances  of  a  great  part  of  the  community,  the  bill  came 
before  the  House  of  Representatives  as  a  government  measure. 
Two  months  of  delay  and  confusion  had  seriously  complicated 
the  difficulties  of  the  case,  but  even  yet  no  necessity  existed 
which  could  in  anyjtist  sense  be  considered  to  exact  the  adop- 
tion of  legal  tender.  The  cry  of  necessity  was  indeed  raised, 
and  prolonged  without  a  pause,  but  it  was  raised  merely  be- 
cause no  solid  argument  could  be  found.  The  ablest  mem- 
bers of  Congress  denied  the  necessity  without  qualification, 
and,  as  has  already  been  shown,  the  ideas  of  necessity  held  by 
the  different  supporters  of  the  bill  were  almost  as  various  as 
the  speeches. 

The  debate  began  on  the  28th  of  January,  by  a  speech  from 
Mr.  Spaulding,  in  which  he  explained  at  considerable  length 
his  reasons  for  forcing  on  the  country  a  measure  which  was  so 
generally  obnoxious.  There  seems  to  be  something  almost 
extravagant  in  so  often  recalling  attention  to  Mr.  Spaulding's 
speeches,  which  have  little  intrinsic  claim  to  notice.  But  Mr. 
Spaulding  was  at  this  moment  in  a  position  of  vast  responsi- 
bility. His  activity  and  persistence  had  can-ied  the  bill  "  over 
the  administration,"  and  were  now  to  carry  it  through  the 
House.  It  is  not  easy,  therefore,  to  set  him  aside  as  a  person 
of  no  consequence,  or  to  pass  his  opinions  by  as  undeserving 
of  attention ;  and  indeed,  however  open  to  criticism  these 
opinions  may  have  been,  Mr.  Spaulding  has  a  perfect  right  to 
14*  V 


322  THE   LEGAL-TENDER   ACT. 

claim  that  they  were  little  if  at  all  inferior  in  merit  to  those 
expressed  by  the  other  friends  of  the  bill.  It  is  true  that  ii 
any  object  were  to  be  gained  by  reviewing  this  ground,  if  it 
were  intended  to  conciliate  support  for  new  opinions,  or  to  lay 
down  principles  for  a  new  party,  it  would  be  well  to  speak  in 
milder  terms  of  men  whose  power  and  authority  have  not  yet 
passed  wholly  away.  But  the  only  inquiry  that  can  have  value 
here  is  to  ask  how  the  future  historian  will  be  compelled  to  treat 
this  chapter  of  American  history ;  and,  unless  the  world  is  to 
move  backward,  it  seems  as  though  he  must  inevitably  declare 
that  not  all  the  campaigns  of  all  the  unfortunate  or  incompe- 
tent generals  employed  during  the  Rebellion  can  furnish  an 
instance  of  grosser  mistreatment  than  was  offered  by  Congress 
in  these  debates.  The  good  sense  and  high  moral  standard 
of  a  few  men  served  only  to  relieve  and  make  more  conspicu- 
ous the  dark  and  impenetrable  cloud  of  ignorance  against 
which  their  efforts  were  utterly  thrown  away.  This  language 
is  no  doubt  strong,  but  it  is  strictly  true.  It  would,  for  ex- 
ample, have  been  difficult  for  any  human  being  to  compress 
within  the  same  limite(J  space  a  greater  number  of  mistaken 
ideas  than  are  contained  in  the  following  extract  from  Mr. 
Spaulding's  speech  of  January  28th  :  — 

"The  bill  before  us  is  a  war  measure,  a  measure  of  necessity,  not 

of  clioice Congress  may  judge  of  the  necessity  in  the  present 

exigency.  It  may  decide  whether  it  will  authorize  the  Secretary 
of  the  Treasup}'  to  issue  demand  treasury  notes,  and  make  theui  ii 
legal  tender  in  payment  of  debts,  or  whether  it  will  put  its  6  or  7 
per  cent  bonds  on  the  market,  at  ruinous  rates  of  discount,  and  raise 
the  money  at  any  sacrifice  the  money-lenders  may  require,  to  meet 
the  pressing  demands  upon  the  treasury.  In  the  one  case  the  gov- 
ernment will  be  able  to  pay  its  debts  at  fair  rates  of  interest ;  in  tlic 
other,  it  must  go  into  the  streets  ithinniruj  for  the  means,  like  an  in- 
dividual in  failing  circinnstances,  and  sure  of  being  used  up  in  the 
end  by  the  avarice  of  those  who  may  exact  unreasonable  terms. 
But,  sir,  knowing  the  power  of  money,  and  the  disposition  there  is 
among  men  to  use  it  for  the  acquisition  of  greater  gain,  I  am  unwil- 
ling that  this  government,  with  all  its  immense  power  and  resources, 
should  be  left  in  the  handa.of  .any  class  of  men,  bankers,  or  money- 


THE   LEGAL-TENDER   ACT.  323 

lenders,  however  respectable  or  patriotic  they  may  be.  The  govern- 
ment is  much  stronger  than  any  of  them.  Its  capital  is  much  greater. 
It  has  control  of  all  the  bankers'  money  and  all  the  brokers'  money, 
and  all  the  property  of  the  thirty  millions  of  people  under  its  jurisdic- 
tion. Why  then  should  it  go  into  Wall  Street,  State  Street,  Chestnut 
Street,  or  any  other  street,  begging  for  money  ?  Their  money  is 
not  as  secure  as  government  money.  All  the  gold  they  possess 
would  not  carry  on  the  goverment  for  ninety  days.  They  issue  only 
promises  to  pay,  which,  if  Congress  does  its  duty,  are  not  half  as 
secure  as  United  States  treasury  notes  based  on  adequate  taxation 
of  all  the  property  of  the  country.  Why,  then,  go  into  the  streets  at 
all  to  borrow  money  f  I  am  opposed  in  our  present  extremities  to 
nil  shifts  of  this  kind.  I  prefer  to  assert  the  power  and  dignity  of 
the  government  by  the  issue  of  its  own  notes."' 

He  would  be  a  bold  man  who  should  undertake  to  say  that 
these  remarks  can,  by  any  process  of  explanation,  be  made  in- 
telligible. The  conclusion,  however,  is  clear  enough,  and  is 
well  worth  attention.  Had  Mr,  Spaulding's  studies  ever  led 
him  to  read  Goetlie's  Faust,  he  might  at  this  point  have  re- 
called the  scene  where  Mephistopheles,  in  the  character  of 
court-jester,  invents  for  the  empire  a  legal-tender  curi'ency 
based  on  the  firm  foundation  of  old  treasures  which  in  past 
ages  might  have  been  hidden  underground,  and  applauds  his 
own  creation  as  better  than  coin,  because,  if  the  bankers  re- 
fused to  give  coin  for  it,  the  holder  would  at  worst  have  only 
the  trouble  of  digging.  The  great  satirist,  however,  with  all 
his  genius,  was  not  so  great  a  satirist  as  Mr.  Spaulding.  He 
never  thought  of  carrying  the  bitterness  of  his  sarcasm  so  far 
as  to  invoke  the  dignity  of  the  empire  as  the  chief  glory  of  his 
paper  money,  and  yet  Mephistopheles  closes  his  scene  with  the 
exulting  exclamation  :  — 

"  Wer  zweifelt  noch  an  lingers  Narren  VVitz!  " 

Yet  one  thing  remains  to  be  said  before  quitting  Mr.  Spauld- 
ing. If  he  really  had  an  idea  in  his  own  mind,  and  sincerely 
believed  that  the  government  need  not  go  into  the  streets  at 
all  to  borrow  money,  and  that  a  simple  assertion  of  its  own 
dignity  would  place  it  in  command  of  indefinite  resources ;  in 
other  words,  if  he  thought  that  the  dignity  of  the  government 


324  THE   LEGAL-TENDER   ACT. 

forbade  its  borrowing,  except  on  its  own  terms,  and  that  there 
was  no  necessity  for  it  to  borrow  at  all,  it  is  a  matter  of  grave 
question  how  he  can  justify  himself  in  having  consented  that 
the  government  should  pay  6  per  cent  or  even  1  per  cent  for 
money,  or  should  promise  to  repay  any  money  whatever. 

The  argument  of  Mr.  Hooper  was  less  extravagant.  He 
avoided  committing  himself  to  anything  except  to  a  cautious 
opinion  that  the  paper  issue  would  make  the  government  finan- 
cially more  independent,  and  that  if  Mr.  Chase  were  discreet, 
the  quality  of  legal  tender  would  help  him  to  keep  the  notes 
at  par.  The  latter  opinion  may,  perhaps,  be  questioned,  and 
indeed  Mr.  Chase  has  himself  questioned  it  in  his  late  judg- 
ment, but  at  least  it  was  not  absurd. 

Mr.  Bingham,  however,  rivalled  Mr.  Spaulding,  though  in 
different  way.  His  speech  was  necessarily  made  without  refer- 
ence to  financial  principles,  since  Mr.  Bingham  made  no  pre- 
tence to  the  slightest  acquaintance  with  that  subject.  He 
therefore  assumed  at  the  outset  that  the  bill  was  necessary, 
because  it  was  said  to  be  necessary,  and  he  then  burst  into  a 
brilliant  denunciation  of  all  persons  who  refused  to  believe 
in  the  necessity.  Mr.  Roscoe  Conkling  was  the  victim  first 
immolated. 

"  Sir,  said  Mr.  Bingham,  "  as  a  representative  of  the  people  I  can- 
not keep  silent  when  I  see  efforts  made  upon  this  side  of  the  house 
and  upon  that,  to  lay  tlie  power  of  the  American  people  to  control 
the  currency  at  the  feet  of  brokers  and  of  city  bankers,  who  liavt! 
not  a  tittle  of  authority,  save  by  the  assent  or  forbearance  of  the 
people,  to  deal  in  their  paper  issued  as  money.  I  am  here  to-day 
to  assert  the  rightful  authority  of  the  American  people  a.s  a  nation- 
ality, sovereignty,  under  and  by  virtue  of  their  Constitution." 

Such  legal  finance  would  not  call  for  notice,  except  that  it 
came  from  a  leader  in  Congress,  who,  in  order  to  protect  the 
sovereignty  of  the  American  people  from  bankers  and  brokers, 
insisted  up<m  creating  a  legal-tender  paper  currency,  which  has 
always  been  and  always  will  be  the  most  efficient  instrument 
ever  yet  discovered  for  the  worst  purposes  of  this  very  class 
of  men.     Yet  Mr.  Bingham  denounced  his  opponents  for  act- 


THE   LEGAL-TENDER   ACT.  0,0^ 

ing  with  the  pui'pose  of  sacrificing  the  public  interest  to  the 
interest  of  bankers  and  brokers.  At  the  same  time  it  is  mor- 
tifying to  observe  the  ignorance  and  vulgar  prejudice  with 
which  the  bankers  and  brokers  of  the  country  were  always 
mentioned  in  these  debates.  Perhaps  no  other  single  charac- 
teristic offers  so  much  instruction  as  this  simple  ftxct,  in  re- 
gard to  the  temper  and  the  range  of  thought  exhibited  in  this 
momentous  discussion.  Mr.  Bingham's  remarks  have  already 
been  quoted.  Mr.  Stevens,  with  his  usual  nice  discrimination, 
characterized  the  dealers  in  money  as  "  sharks  and  brokers," 
to  which  he  afterwards  added  "  harpies."  Mr.  Shellabarger, 
after  appropriating  bodily  and  almost  literally  several  pages 
of  Macaulay's  most  luminous  and  most  familiar  writing,  in 
the  effort  to  maintain  himself  on  Macaulay's  level  without 
Macaulay's  aid,  could  discover  no  more  original  idea  for  his 
peroration  than  to  denounce  the  outside  opposition  to  this  bill 
as  coming  from  interested  persons  in  the  expectation  "  that  out 
of  the  blood  of  their  sinking  country  they  may  be  enabled  to 
coin  the  gains  of  their  infamy."  Senator  Wilson  announced 
that  the  practical  qiiestion  lay  between  "  brokers  and  jobbers 
and  money-changers  on  the  one  side,  and  the  people  of  the 
United  States  on  the  other."  Invective  like  this  properly  be- 
longs only  to  a  debating-club  of  boys.  But  if  invective  were 
to  be  used  at  all,  and  if  these  bankers  had  been  represented 
in  Congress  by  any  person  capable  of  using  it,  he  might  easily 
have  retaliated  in  a  manner  which  would  have  left  little  oj)- 
portunity  for  an  effective  rejoinder.  He  might  have  replied 
that  men  who  claim  to  be  trusted  for  all  they  say  in  regard  to 
a  financial  exigency ;  who  assert  in  one-  breath  that  a  neces- 
sity exists,  which  in  the  next  breath  they  acknowledge  does 
not  exist ;  who  presume  on  this  utterly  unwaiTantable  plea  of 
necessity  to  exculpate  themselves  from  what,  without  exculpa- 
tion, is  the  wickedest  vote  the  representative  of  the  people  can 
ever  give  ;  a  vote  which  delivei'S  labor  to  the  marcy  of  capital ; 
a  vote  which  forces  upon  the  people  that  as  money  which  in 
no  just  sense  is  money ;  a  vote  which  establishes  as  law  one 
of  the  most  abominable  frauds  whicK  law  can  ever  be  prosti- 


326  THE   LEGAL-TENDER   ACT. 

tuted  to  enforce ;  —  that  such  men  are  not  the  persons  to 
judge  of  others'  patriotism,  honesty,  or  good  sense. 

And  here  it  may  be  proper  to  add  a  remark  as  to  the  dis- 
position of  Congress  to  stumble  over  constitutional  difficul- 
cies.  A  very  large  part  of  the  debate  turned  on  the  point  of 
technical  construction  of  the  Constitution ;  and  many  mem- 
bers of  the  legislature  who  hesitated  about  nothing  else  found 
an  insurmountable  obstacle  here.  The  constitutional  argu- 
ment, whatever  its  weight  may  be,  is  one  on  which  only 
lawyers  will  be  likely  to  insist.  Whether,  under  a  strict  inter- 
pretation of  constitutional  powers,  the  hvw  of  legal  tender  is 
to  be  justified  or  not,  can  make  but  little  difference  to  j^ersons 
who  look  for  their  principles  of  action  beneath  the  letter  of 
the  Constitution,  to  the  principles  upon  which  all  government 
and  all  society  must  ultimately  rest.  The  law  of  legal  tender 
was  an  attempt  by  artificial  legislation  to  make  something 
true  which  was  false.  This  is  the  sum-total  of  the  argument 
against  legal  tender,  and  this  argiunent  is  based  on  the  eternal 
maxim  that  the  foundation  of  law  is  truth.  If  it  is  possible 
for  the  rhetoric  of  congressional  orators  or  the  ingenuity  of 
professional  lawyers  to  reduce  the  principle  involved  to  simpler 
elements  than  this,  at  all  events  neither  the  debates  at  the 
Capitol  nor  the  arguments  at  the  bar,  however  brilliant  or 
elaborate  they  may  have  been,  have  as  yet  shown  any  prob- 
ability of  success. 

It  woiild  be  pleasant  to  extract  from  the  speeches  delivered 
in  favor  of  this  bill  any  such  portions  as  show  depths  of  knowl- 
edge, elevation  of  morals,  or  breadth  of  mind.  Unfortunately 
nothing  of  the  sort  exists.  Almost  all  the  soundest  minds  in 
the  House  declared  themselves  against  legal  tender  and  denied 
its  necessity.  Judge  Thomas  of  Ma.ssaciiusetts  and  Mr.  Koscoo 
Conkling  of  New  York,  Mr.  Moirill  of  Vermont,  from  the  (/om- 
mittee  of  Ways  and  Means,  Mr.  Horton  of  Ohio,  also  of  the 
Ways  and  Means,  all  the  Democratic  members,  and  others  who 
contented  themselves  with  a  silent  vote,  opposed  the  legal- 
tender  clause.  And  by  some  freak  of  nature,  which  seems 
occasionally  to  amuse  itself  with  putting  into  the  mouths  of 


THE   LEGAL-TENDER   ACT.  327 

extreme  and  violent  men  language  and  argument  which  ex- 
press the  most  elevated  sense  of  fitness,  the  speech  of  Mr. 
Owen  Lovejoy  of  Illinois  was  in  its  short  space  as  clear,  as 
vigorous,  and,  from  a  rhetorical  point  of  view,  as  perfect,  as 
the  oldest  statesman  or  the  most  exacting  critic  or  the  deepest 
student  of  finance  could  have  hoped  or  wished  to  make.  But 
although  the  opponents  of  the  measure  were  far  superior  in 
intellect  to  its  supporters,  and  although  their  arguments  were 
essentially  sound,  and  under  ordinary  circumstances  would 
probably  have  proved  successful,  they  could  not  deal  with  the 
authority  of  the  executive,  which  Mr.'  Chase  now  used  with  all 
his  energy  in  favor  of  the  bill.  On  the  6th  of  February  Mr. 
Spaulding  pressed  his  measure  to  a  vote,  and  it  passed  the 
House  by  a  majority  of  93  to  59. 

One  can  scarcely  resist  the  conclusion  that,  had  the  bill 
originated  in  the  Senate,  and  been  discussed  without  the  pre- 
judice arising  from  the  responsibility  of  rejecting  what  was 
approved  by  the  House  and  urged  by  the  Executive,  and  had 
it  been  acted  upon  before  so  much  valuable  time  had  been 
lost,  the  country  would  probably  for  the  time  have  been  spared 
the  great  misfortune  of  its  adoption.  This  opinion  is  ren- 
dered probable  by  the  higher  and  more  statesmanlike  spirit  in 
which  the  Senate  discussed  the  proposed  measure.  If  it  were 
possible  that  a  mere  word  of  unqualified  admiration  could 
please  the  ear  or  help  to  soothe  the  rest  of  a  statesman  whose 
loss  the  nation  has  regretted  but  has  never  fairly  appreciated, 
there  would  be  a  keen  and  personal  pleasure  in  repeating 
the  language  of  Mr  Fessenden,  who  reported  this  bill  to  the 
Senate : — 

"  The  question  after  all  returns  :  is  this  measure  absolutely  indis- 
pensable to  procure  means  ?  If  so,  as  I  said  before,  necessity  knows 
no  law%  What  are  the  objections  to  it  ?  I  will  state  them  as  briefly 
as  I  can.  The  first  is  a  negative  objection.  A  measure  of  this  kind 
certainly  cannot  increase  confidence  in  the  ability  or  integrity  of  the 
country 

"  Next,  in  my  judgment,  it  is  a  confession  of  bankruptcy 

"  Again,  say  what  you  will,  nobody  can  deny  that  it  is  bf^d  faith 
....  and  encourages  bad  morality  both  in  public  and  private 


328  THE  LEGAL-TENDER   ACT. 

"  Again,  it  encourages  bad  morals,  because  if  the  currency  falls 
(as  it  is  supposed  it  must,  else  why  defend  it  by  a  legal  enactment), 
Avhat  is  tlie  result  ?  It  is  that  every  man  who  desires  to  pay  off  his 
debts  at  a  discount,  no  matter  what  the  circumstances  are,  is  able  to 
avail  himself  of  it  against  the  will  of  his  neighbor  who  honestly  con- 
tracted to  receive  something  better. 

"  Again,  sir,  necessarily  as  a  result,  in  my  judgment,  it  must  inflict 
a  stain  upon  the  national  honor 

"  Again,  sir,  it  necessarily  changes  the  value  of  all  property 

"  Again,  sir,  a  stronger  objection  than  all  that  I  have  to  this  prop- 
osition is  that  the  loss  must  fall  most  heavily  upon  the  poor  by  rea- 
son of  the  inflation." 

He  concluded  by  declaring  that  in  his  opinion  the  legal-ten- 
der clause  was  not  necessary,  and  he  reported  several  amend- 
ments. One  of  these,  the  second,  he  described  in  these  terms  : 
"  The  committee  ....  give  to  the  Secretary  the  power  to  sell 
the  bonds  of  the  government  at  any  time  that  it  may  l)e 
necessary,  at  the  market  price,  in  order  to  raise  coin.  That 
can  oltpays  he  done.''''  This  amendment  was  idtimately  adopted 
jind  became  part  of  the  bill,  l)ut  the  Secretary  preferred  reach- 
ing the  same  result  by  a  different  policy,  and  the  old  system 
was  therefore  retained. 

But  it  was  reserved  for  Mr.  Collamer  of  Vermont  to  take 
yet  Htrouger  and  more  uncompromisiug  ground.  "  Even  if  it 
was  a  necessity,*'  said  he,  "  I  would  not  vote  for  this  measure." 
Fidelity  to  a  trust  is  not  so  universal  that  one  might  not  be 
permitted  to  sympathize  with  a  man  who,  when  placed  between 
the  alternatives  of  utter  destniction  on  the  one  hand  and  what 
lie  thinks  a  breach  of  trust  on  the  other,  in  spite  of  necessity 
still  maintains  the  standard  of  his  personal  honor.  Biit  there 
was  in  reality  no  such  bravado  in  tliis  declaration  of  Judge 
(Jollamer's.  It  was  not  mere  impracticability  that  promjjted 
his  resistance,  but  a  superior  discernment  that  the  evidence 
of  necessity  which  imposes  on  a  legislative  ])ody  in  times  of 
panic  is  not  to  be  trusted.  Even  on  a  calculation  of  chances, 
it  is  far  more  likely  that  other  resoiu'ces  iire  available  than 
that  so  desperate  an  exijedient  should  offer  the  only  hope  of 
salvation.     Nav,  a  measure  which  iu  itself  is  iuherentlv  and 


THE   LEGAL-TENDER   ACT.  399 

irredeemably  wrong  cannot  in  any  juSt  sense  be  a  necessity. 
Mr.  Collamer's  speech,  therefore,  was  only  an  energetic  ex- 
pression of  his  resolution,  not  that  he  would  refuse  to  obey 
necessity,  but  that  he  would  refuse  to  believe  it. 

The  position  taken  by  Mr.  Sumner  wanted  only  the  same 
defiant  confidence  in  the  eternal  laws  of  truth  to  have  made  it 
still  more  impressive  than  any  of  the  others.  Unhappily,  by 
the  side  of  Mr.  Fessenden  and  Mr.  CoUamer,  his  conclusions 
seemed  tinged  with  irresolution  :  — 

■•  And  now,  as  I  close,  I  will  not  cease  to  be  frank.  Is  it  neces- 
sary to  incur  all  the  unquestionable  evils  of  inconvertible  paper, 
forced  into  circulation  by  act  of  Congress,  — to  suffer  the  stain  upon 
our  national  fiiith,  —  to  bear  the  stigma  of  a  seeming  repudiation, — 
to  lose  for  the  present  that  credit  which  in  itself  is  a  treasury,  —  and 
to  teach  debtors  everywhere  that  contracts  may  be  varied  at  the 
will  of  the  stronger?    Surely  there  is  much  in  these  inquiries  which 

may  make  us  pause It  is  hard,  very  hard,  to  think  that  such  a 

country,  so  powerful,    so  rich,  and  so  beloved,  should  be  compelled 

to  adopt  a  policy  of  even  questionable  propriety Surely  we 

must  all  be  against  paper  money,  —  we  must  all  insist  on  maintain- 
ing the  integrity  of  the  government,  —  and  we  must  all  set  our  faces 
against  any  proposition  like  the  present,  except  as  a  temporary  ex- 
pedient rendered  imperative  by  the  exigency  of  the  hour Oth- 
ers may  doubt  if  the  exigency  is  sufficiently  imperative,  hut  the  Sec- 
retary of  the  Treasury  does  not  doubt Reluctantly,  painfully,  I 

consent  that  the  process  should  issue." 

The  authority  of  the  Secretary  of  the  Treasury  overruled 
the  scruples  of  the  Senate,  and  the  bill  passed  by  a  majority 
of  five  votes  on  the  legal-tender  clause.  It  is  scarcely  worth 
while  to  carry  the  scene  back  to  the  House,  in  order  to  ascer- 
tain the  fate  of  the  Senate  amendments,  or  to  cull  from  the 
second  debate  new  subjects  for  quotation.  It  is  easy,  only  too 
cas}',  to  ridicule  and  satirize  the  doctrines  of  public  men,  and 
something  like  an  apology  to  the  public  is  due  for  the  extent 
to  which  this  aj)petite  has  been  indulged  in  these  pages.  It  is 
but  just  to  add  that  Mr.  Spaulding  at  least  did  strongly  and 
invariably  insist  upon  the  difference  between  legal-tender  notes 
that  were  fundable  and  the  later  issue  of  trreeubacks  which 


330  THE   LEGAL-TENDER   ACT. 

were  not  so.  In  point  of  fact  the  difference  was  very  slight. 
There  was  nothing  in  the  condition  of  fundability  which  made 
legal  tender  anything  but  legal  tender,  nor  would  the  princi- 
ple of  legal  tender  have  been  any  sounder,  even  though  it  had 
been  attached  to  the  bonds  themselves.  It  is  amusing  to  no- 
tice that,  as  the  later  issues  of  legal  tender  were  made,  and  the 
depreciation  became  excessive,  Mr.  Spaulding  by  similar  steps 
became  virtuous,  until  at  last  his  virtue  grew  intense.  He  at- 
tributed the  failure  of  his  favorite  financial  scheme  to  the 
mis-takes  of  others,  and  he  j^roposcd  as  an  infallible  cure  a 
restoration  of  his  funding  proviso.  There  is  little  probability 
that  Mr.  Spaulding's  mind  will  ever  succeed  in  gaining  a  higher 
stand-point  than  this,  or  will  ever  look  over  a  wider  horizon 
where  it  can  more  broadly  measure  the  uncontrollable  power 
of  the  elements  which  he,  like  the  unlucky  companions  of 
Ulysses,  ignorantly  set  free. 

Such  was  the  history  of  the  legal-tender  bill.  So  far  as  any 
evidence  of  its  necessity  can  be  drawn  from  the  action  of  the 
Executive  at  the  time,  the  late  decision  of  Chief  Justice  Chase 
has  left  no  doubt  as  to  the  facts.  That  Mr.  Chase  should,  as 
Secretary  of  the  Treasury,  have  adopted  the  course  he  did 
was  doubly  imfortunate  :  in  the  first  place,  because  he  created 
legal  tender ;  and  in  the  second  place,  because  when  tlie  delu- 
sion was  over,  and  his  mind  reverted  to  its  first  sound  princi- 
ples, the  action  he  had  taken  as  Secretary  of  the  Treasury 
remained  in  the  public  memory  to  reduce  the  authority  of  the 
opinions  he  was  bound  to  express  as  Chief  Justice.  Into  the 
legal  correctness  or  political  propriety  of  these  opinions  it  is 
no  purpose  of  this  essay  to  enter.  No  one  who  holds  strong 
convictions  against  legal  tender  as  a  measure  of  finance  is 
likely  greatly  to  trouble  his  mind  with  the  question  whether 
such  a  power  has  or  has  not  been  conferred  by  the  Constitu- 
tion upon  Congi'css.  Though  it  were  conferred  in  the  most 
explicit  terms  language  is  capable  of  supplying,  there  could 
be  no  excuse  on  that  account  for  changing  an  opinion  as  to  its 
financial  merits,  and  its  financial  merits  are  not  a  subject  for 
lawyoi-8,  nor  even  for  judges,  as  such,  to  decide.     These  hap- 


THE   LEGAL-TENDER   ACT.  331 

pily  rest  on  principles  deeper  than  statute  or  than  constitu- 
tional law.  They  appeal  to  no  written  code,  and  whenever  the 
public  attempts  to  overrule  them,  the  public  does  so  only  at 
its  own  peril. 

There  remains  but  one  more  point  to  touch.  The  common 
impression  undoubtedly  is,  that  even  though  there  were  no 
actual  necessity  for  a  law  of  legal  tender  so  early  as  February, 
1862,  yet  at  some  subsequent  time  the  enactment  of  such  a 
law  would  have  proved  inevitable.  This  opinion  should  prop- 
erly form  the  subject  of  a  separate  paper.  If  it  be  once  ac- 
knowledged that  the  law  of  February,  1862,  was  imnecessary 
and  passed  by  a  practical  fraud,  the  whole  condition  of  the 
argument  is  changed.  Whenever  the  public  has  reached  this 
point,  it  will  be  time  to  enter  upon  the  wider  field  of  discussion 
into  which  so  vague  and  general  a  proposition  must  lead.  Yet, 
without  venturing  at  present  on  any  absolute  denial  of  the 
theory,  since  this  would  require  much  explanation  and  reason- 
ing, it  is  only  fair  to  say  that,  although  the  subject  is  scarcely 
capable  at  present  of  positive  demonstration,  there  is  abso- 
lutely no  evidence  to  prove  that  the  government  might  not 
have  carried  the  war  to  a  successful  conclusion  without  the 
issue  of  a  single  dollar  of  its  legal-tender  paper.  Such 
appears  to  be  the  opinion  of  the  Chief  Justice,  as  it  is  un- 
doubtedly the  natural  inference  from  economical  principles. 

It  is,  however,  true  that  after  the  first  issues  of  the  paper, 
its  original  purpose  and  importance  as  a  resource  against  a 
temporary  exigency  —  that  purpose  which  had  been  so  dis- 
creditably used  in  forcing  the  bill  through  Congress  —  was 
almost  wholly  lost  from  sight,  and  the  paper  assumed  entirely 
new  functions  as  a  financial  instrument. 

The  government,  adhering  to  the  policy  of  selling  its  bonds 
only  at  par,  was  obliged  to  consider  its  paper  as  the  par  stand- 
ard, and  the  next  step  was  to  issue  of  its  own  accord  enough 
paper  to  "  float "  the  successive  loans.  This  was  equivalent 
to  selling  its  credit  at  the  market  price,  with  the  addition  of 
voluntarily  degrading  its  own  standard  of  value.  In  order  to 
protect  the  nation's  credit  from  degi'adation  in  the  hands  of 


332 


THE   LEGAL-TENDER   ACT. 


bankers  and  brokers,  the  government  undertook  to  dishonor  it 
of  its  own  free  will.  As  a  financial  policy,  this  tortuous  and 
disreputable  expedient  will  not  bear  a  moment's  examination ; 
but  there  was  one  incidental  function  of  the  paper,  closely 
connected  with  this,  on  which  more  stress  may  be  laid.  The 
issue  of  paper  money  in  large  quantities  does  produce  a  tem- 
porary and  feverish  excitement,  which,  during  a  certain 
length  of  time,  may  facilitate  borrowing,  though  at  a  frightful 
ultimate  cost.  If  the  sole  object  of  the  legal  tender  were  to 
cause  this  temporary  stimulus,  and  if  this  stimulus  can  be 
proved  to  have  been  essential  to  financial  success,  the  manage- 
ment of  the  nation's  financial  affairs  during  the  war  may 
admit  of  excuse  if  not  of  praise.  Unfortunately,  neither  of 
these  conditions  can  be  established. 

This  essay  aims  at  no  advocacy  of  any  financial  nostrum, 
nor  at  any  cure  of  present  difficulties.  In  the  popular  humor 
of  the  moment,  it  is  more  than  ever  doubtful  wdiether  any 
advice  that  is  wise  would  be  listened  to,  or  whether  any  advice 
that  has  a  chance  of  being  listened  to  could  possibly  be  wise. 
Mere  knowledge  has  no  hold  upon  political  power  in  its  treat- 
ment of  this  subject.  Other  considerations  are  supreme  both 
in  Congress  and  in  the  public  mind.  But  although  knowledge, 
and  the  application  of  simple  truth  in  politics,  are  for  the 
present  divorced  from  power  and  no  longer  control  the  course 
of  current  events,  yet  at  least  the  past  belongs  to  them  as 
their  exclusive  property,  and  no  one  can  prevent  the  past  from 
receiving,  sooner  or  later,  the  judgment  which  historical  criti- 
cism must  inevitably  exact  for  the  betrayal  of  principles  to 
which  it  pretended  allegiance. 


THE  RAILROAD   SYSTEM.^ 


CHAPTER  I. 

THE    ERA    OF    CHANGE. 

UPON  the  7th  of  August,  in  the  year  1807,  Robert  Fulton, 
with  his  little  party  of  anxious  and  doubting  guests  on 
board  the  "  Claremont,"  cast  oft"  from  the  piers  of  New  York, 
and  the  waters  of  the  Hudson  were  first  troubled  by  the  strokes 
of  the  steara-paddle.  There  are  few  Americans  at  least  who 
have  not  lingered  over  the  story  and  shared  in  the  excitement 
of  that  famous  voyage  ;  —  dwelling  upon  its  every  detail  from 
the  moment  the  clumsy  little  steamer  —  big  with  the  fate  of 
commercial  marines  and  of  navies  —  left  her  wharf  at  New 
York,  until  the  steeples  of  Albany  shone  in  the  distance. 

Twenty-two  years  later  the  corollary  to  this  great  event  was 
worked  out  in  England.  Popular  biographers  have  made  the 
world  even  more  familiar  with  the  incidents  of  this  second 
memorable  day  than  are  Americans  with  the  story  of  Fulton's 
voyage.  On  the  6th  of  October,  1829,  George  Stephenson,  an 
ex-stoker  and  a  graduate  of  the  coal-mines  of  Nortlmmber- 
land,  but  withal  one  of  the  most  vigorous  intellects  which 
England,  rich  as  she  has  been  in  that  class  of  products,  has 
ever  given  to  the  world,  —  upon  that  day  Stephenson  drove 
his  little  experimental  locomotive  "  The  Rocket "  from  Man- 

*  By  Charles  F.  Adahis,  Jr.  Miicli  of  tlie  material  used  in  the  prepara- 
tion of  this  paper  originally  appeared  in  the  following  articles  in  the  North 
American  Review :  The  Railroad  System,  April,  1868  ;  Railroad  Inflation, 
January,  1869;  Railroad  Problems  in  1860,  January,  1870;  The  Government 
and  the  Railroad  Corporations,  January,  1871. 


oo4  THE   RAILROAD    SYSTEM. 

Chester  to  Liverpool  and  back.  "  The  Rocket  "  weighed  only 
four  tons  and  a  quarter,  but  Stephenson  showed  that  it  could 
move  at  a  rate  of  thirty  luiles  an  hour,  and  upon  that  day  the 
modem  railroad  sj'stem  was  born. 

At  exactly  the  same  time,  in  this  country,  the  Cumberland 
Turnpike  and  its  construction  was  a  fiercely  agitated  political 
question.  It  was  part  of  a  great  system  of  internal  improve- 
ments then  contemplated  ;  and,  in  identifying  himself  with  it, 
Henry  Clay  doubtless  thought  that  he  had  imperishably  con- 
nected his  memory  with  a  monument  more  enduring  than 
bronze,  —  with  the  Appian  Way  of  America.  The  ambition 
was  an  honorable  one ;  all  human  experience  justified  his 
faith  in  the  permanence  of  the  foundations  upon  which  he 
rested  it.  From  a  period  long  before  the  Christian  Era  down 
to  the  year  1829  there  had  been  no  essential  change  in  the 
system  of  internal  commimication.  At  present,  before  another 
half  century  has  yet  elapsed,  the  Cumberland  Turnpike  is  as 
antiquated  as  the  Appian  Way,  —  as  useful,  perhaps,  but  far 
less  interesting. 

As  to  the  railroad  system,  it  long  ago  became  impossible 
exactly  to  compute  the  number  of  miles  contained  in  it  or  the 
millions  of  capital  wliich  its  construction  had  cost ;  it  is  very 
ditHcult  upon  cither  of  these  pohits  to  arrive  at  conclusions 
even  approximately  correct.  Neither  where  the  attempt  is 
made  is  the  result  at  all  encouraging.  The  mind  fails  to  grasp 
propositions  of  such  magnitude ;  the  mere  piling  up  of  num- 
bers conveys  no  new  idea.  For  present  purposes  it  may,  in 
round  numbers,  be  said  that  in  1870  there  were  about  12.'i,000 
miles  of  railroad  in  the  two  hemispheres,  constructed  at  an 
average  cost  of  little  less  than  $100,000  per  mile,  and  thus 
representing  hardly  less  than  twelve  thousand  million  dollars 
of  invested  capital.  All  this  has  grown  out  of  the  thirty-two 
miles  of  road  alone  in  existence  just  forty  years  ago. 

These  figures  are  certainly  sufficiently  startling  ;  but,  large 
as  they  are,  they  are  increasing  at  a  constantly  accelerating 
rate.  Thirty  years  ago  in  this  country  wo  constructed  annu- 
ally some  500  miles  of  road  ;  twenty  years  ago  this  amount 


THE   EKA   OF   CHANGE.  335 

had  increased  to  1,500,  and  as  recently  as  ten  years  ago,  it 
had  scarcely  reached  2,000  ;  now  we  build  6,000,  and  in  the 
year  1871  it  is  stated  that  enterprises  involving  20,000  miles 
of  road  and  eight  hundred  million  of  dollars  are  simultane- 
ously going  forward  to  completion. 

Though  this  material  or  financial  aspect  of  the  system  is 
that  which  is  almost  invariably  dwelt  upon,  it  is  by  no  means 
the  most  interesting  one.  Here  is  an  enormous,  an  incalcula- 
ble force  pi'actically  let  loose  suddenly  upon  mankind  ;  exer- 
cising all  sorts  of  influences,  social,  moral,  and  political ;  pre- 
cipitating iipon  us  novel  problems  which  demand  immediate 
solution ;  banishing  the  old  before  the  new  is  half  matured  to 
replace  it ;  bringing  the  nations  into  close  contact  before  yet 
the  antipathies  of  race  have  begun  to  be  eradicated  ;  giving 
us  a  history  full  of  changing  fortunes  and  rich  in  dramatic 
episodes.  Yet,  with  the  curious  hardness  of  a  material  age, 
we  rarely  regard  this  new  power  otherwise  than  as  a  money- 
getting  and  time-saving  machine.  We  know  sufficiently  well 
the  number  of  passengers  and  of  tons  of  freight  which  the  rail- 
road system  annually  moves ;  we  know  how  much  it  cost,  we 
guess  at  what  it  will  return ;  but  not  many  of  those  who  deal 
in  its  securities,  or  live  by  means  of  it,  or  legislate  for  it,  or 
who  fondly  believe  they  control  it,  ever  stop  to  think  of  it  as, 
with  perhaps  two  exceptions,  the  iiiost  tremendous  and  far- 
reaching  engine  of  social  change  which  has  ever  either  blessed 
or  cursed  mankind. 

It  cannot,  therefore,  be  time  wasted  to  look  for  a  while  at 
the  new  agent  or  master  from  the  other  point  of  view,  —  to 
consider  how  it  has  already  affected  human  interests.  Some 
such  discipline  is  absolutely  necessary  before  any  one  can  be 
at  all  fitted  to  approach  the  vei*y  difficult  problems  arising  out 
of  it  which  are  certainly  in  store  for  us,  both  socially  and  po- 
litically, in  our  immediate  future.  Perhaps  if  the  existing 
community  would  take  now  and  then  the  trouble  to  pass  in 
review  the  changes  it  has  akeady  witnessed  it  would  be  less 
astounded  at  the  revolutions  which  continually  do  and  contin- 
ually must  flash  before  it ;  perhaps  also  it  might  with  more 


336  THE   KAILEOAD   SYSTEM. 

gi"ace  accept  the  inevitable,  and  cease  from  useless  attempts  at 
making  a  wholly  new  world  conform  itself  to  the  rules  and 
theories  of  a  bygone  civilization. 

Among  the  transfonuations  effected  by  steam-locomotion, 
perhaps  the  most  obvious  of  all  is  the  rapid  enlargement  of 
the  area  of  civilization.  Emigration  has  recently  passed  into 
a  new  phase  of  development,  under  which  it  might  almost 
be  said  that  entire  nations  have  .  been  mobilized.  Until  as 
recently  as  the  year  1847,  the  old  Phoenician  method  of  colo- 
nization, somewhat  improved  in  details,  yet  prevailed.  As 
the  Greeks  sent  out  colonies  to  the  ^Egean  isles,  to  Asia 
Minor,  and  to  Sicily,  —  as  the  Romans  conquered  the  barba- 
rians, and  then  held  them  as  colonists,  —  so  the  Spanish,  the 
Dutch,  the  French,  and  the  English  planted  their  offshoots 
in  every  quarter  of  the  globe  called  imcivilized.  In  some 
regions,  as  in  the  East,  they  held  races  in  subjection,  and  fos- 
tered colonies  of  the  Roman  type,  while  in  others  they  estab- 
lished feeble  settlements  on  the  model  of  the  Greeks.  As  a 
rule,  the  growth  of  these  colonies  was  as  slow  in  the  modern  as 
it  had  been  in  the  ancient  times.  By  no  means  was  it  always 
even  mpid  enough  to  be  healthy.  A  few,  in  the  long  course 
of  years,  struggled  through  the  vicissitudes  of  infancy  and 
became  flourishing  communities ;  many  languished,  and  many 
died.  The  law  of  their  progression  through  twenty  centuries 
had  continued  essentially  the  same. 

At  length,  in  1846,  vague  rumors  of  regions  rich  beyond  all 
precedent  in  golden  ores,  and  only  then  discovered  on  the 
shores  of  the  Pacific,  pervaded  the  whole  civilized  globe,  and, 
under  the  influence  of  steam,  a  new  phase  of  colonization  at 
once  developed  itself  To  the  new  gold-fields  rushed  whole 
populations,  and  foilhwith  steam  became  their  servant,  and 
bound  them  closely  with  the  older  world.  Where  yesterday 
had  been  a  wilderness,  California  and  Australia  took  their 
])laceK  among  the  conunuuitics  of  the  globe.  The  new  era  was 
making  itself  felt,  and,  under  its  fostering  impulse,  communi- 
ties sprang  into  life  full  grown.  Without  the  assistance  of 
steam,  settlements  would  probably  have  been  established,  and 


TIIK   ERA   OF   CHANGE.  337 

lingered  in  slow  growth,  along  the  shores  of  the  sea  and  on  the 
banks  of  navigable  rivers  ;  but  the  steamboat  and  the  locomo- 
tive lent  their  aid,  and  the  very  Arabs  of  civilization  became 
substantial  communities.  So  far  as  the  inducement  of  gold 
was  concerned,  the  same  process  now  going  on  upon  both  slopes 
of  the  Rocky  Mountains  was  witnessed  in  the  colonization  of 
Mexico  and  Cuba.  With  Cuba  it  succeeded,  as  the  ocean  con- 
nected the  colonist  with  the  world ;  with  Mexico  it  failed,  be- 
cause colonization  was  too  rapid  to  be  healthy,  and  the  scat- 
tered emigrants,  cut  off  from  and  unsupported  by  the  inter- 
course of  their  kind,  merged  into,  and  both  degraded  and  were 
degraded  by,  the  semi- civilization  of  the  aborigines.  Such  was 
not  the  case  with  Nevada.  The  discovery  of  some  black-look- 
ing, heavy  fragments  of  stone  in  the  uninhabited,  hideous 
region  of  the  Great  Basin  suddenly  revealed  to  the  world  in 
1859  the  existence  of  that  famous  Comstock  lode,  which  almost 
at  once  called  a  State  into  existence.  Mining-camps,  towns, 
and  even  cities  started  up  like  mushrooms  and  at  once  experi- 
enced the  influence  of  the  new  law  of  civilization.  No  long, 
wearisome,  and  dangerous  wagon-road,  scarcely  marked  out 
across  the  plains,  connected  a  nomadic  population  of  semi-bar- 
barous, undomesticated  men  with  a  distant  civilization  which 
was  to  them  as  a  dream  of  their  childhood  ;  but,  almost  at 
once,  the  ringing  grooves  of  the  railroad  merged  them  with  the 
denser  populations  of  the  East  and  West.  So  the  new  era  of 
material  development,  by  a  process  of  its  own,  is  peopling  and 
subduing  the  wilds  of  America  and  Australia.  This  is  the 
present  exemplification  of  a  law  which  dates  back  only  twenty 
years. 

What  other  possible  exemplifications  of  it  await  us  ]  Cali- 
fornia and  Australia  have  revealed  their  secrets  ;  —  how  long 
will  those  of  Mexico  and  South  America  and  Africa  remain 
concealed  1  The  application  of  the  new  process  of  develop, 
ment  to  Mexico  and  South  America  can  only  be  a  question  of 
time :  already  begun,  it  must  go  on.  But  as  yet  Africa  can  but 
be  accounted  among  the  possibilities  of  the  future.  Let  it 
once  share  the  fate,  as  it  one  day  may  well  do,  of  Califoraia  or 
1.5  V 


338  THE  RAILROAD  SYSTEM. 

of  Australia,  let  it  once  reveal  a  hidden  wealth,  which  some- 
where surely  exists,  and  those  now  living' may  see  the  solu- 
tion of  its  enigma.  Now,  such  a  result  is  but  a  dream ;  but 
it  is  a  dream  far  less  strange  than  the  Australian  and  Cali- 
fomian  facts  of  the  last  twenty  years. 

We  are  always  inclined  to  look  upon  the  world  as  finished, 
upon  known  forces  as  having  produced  their  final  results ;  but 
results  are  never  complete.  Perhaps  in  1481  the  thinkei-s 
of  that  day  may  have  considered  that  the  printing-press  had 
expended  its  force  as  a  new  power ;  and  in  1522  pliiloso- 
phers  may  have  supposed  that  the  ultimate  material  effects 
of  geogi-aphical  discovery  could  be  approximately  estimated. 
But,  while  it  is  given  to  ordinary  men  to  see  the  full  fruits 
of  their  own  action,  the  seed  sown  by  men  of  genius,  though 
it  may  germinate  early,  arrives  at  its  maturity  only  with  a 
distant  posterity.  The  discoveries  of  Gutteuberg  and  Colum- 
bus have  produced  more  startling  and  more  clearly  defined 
results  upon  the  destinies  of  the  human  race  within  the  last 
twenty -five  years  than  in  any  other  equal  period  of  time 
during  the  four  previous  centuries.  So  will  it  be  with  the 
discovery  made  by  Watt,  and  its  applications  by  Fulton  and 
Stephenson.  A  remote  civilization  in  central  Africa  or  Soutli 
America  may  perhaps  hereafter  gauge  its  whole  influence  in 
subduing  the  wilderness  and  forcing  its  secrets  from  the  in- 
nermost recesses  of  nature,  but  the  casting  up  of  that  balance 
sheet  will  not  fall  to  the  lot  of  this  century. 

Yet  the  extent  of  the  change  wrought  by  the  new  force  upon 
the  limits  of  civilization  has  hardly  been  greater  than  tiiat 
which  has  been  effected  in  manners  and  habits  of  thought. 
Whatever  constantly  enters  into  the  daily  life  soon  becomes 
an  tmnoticed  part  of  it,  and  the  infinitely  varied  influences  of  ^ 
the  railroad  system  are  so  miich  a  part  of  our  everyday  act 
and  thoughts  that  they  have  become  familiar,  and  have  ceasec 
to  be  marvellous.     The  changes  have  been  so  gradual  that  we 
have  failed  to  notice  their  completeness.    Yet  most  people  whc 
observe  at  all  have  vaguely  felt  that  there  was  some  elementl 
which  made  the  present  century  different  from  all  others,  —J 


THK   ERA   OF   CHANGE.  339 

a  century  of  surprises.  The  young  have  found  things  differ- 
ent upon  attaining  manhood  from  what  they  remembered  in 
their  youth  ;  the  middle-aged  have  wondered  if  change  flashed 
in  the  eyes  of  their  fathers  as  it  has  in  their  own ;  and  the 
old  can  easily  remember  a  period  less  removed  from  the 
Middle  Ages  than  from  the  passing  year.  Our  times  are  not 
as  those  of  our  fathers. 

No  power  has  been  so  great  as  to  be  able  to  defy  the 
influence  of  the  new  force  at  work,  and  no  locality  so  ob- 
scure as  to  escape  it.  From  the  most  powerful  of  Euro- 
pean monarchies  to  the  most  insignificant  of  New  England  vil- 
lages, the  revolution  has  been  all-pervading.  Abroad  and  at 
liome  it  has  equally  nationalized  people  and  cosmopolized 
nations.  The  chief  bonds  of  nationality  are  unities  of  race, 
of  language,  of  intei-est,  and  of  thought.  The  tendency  of 
steam  has  universally  been  towards  the  gravitation  of  the 
parts  to  the  centre,  —  towards  the  combination  and  concentra- 
tion of  forces,  whether  intellectual  or  physical.  Increased 
communication,  increased  activity,  and  increased  facilities  of 
trade  destroy  local  interests,  local  dialects,  and  local  jealousies. 
The  days  of  small  barrier  kingdoms  and  intricate  balances  of 
power  are  wellnigh  numbered.  Whatever  is  homogeneous  is 
combining  all  the  world  over  in  obedience  to  an  irresistible 
law.  It  is  the  law  of  gravitation  applied  to  human  afliiii-s. 
One  national  centi'e  regulates  the  whole  daily  thought,  trade, 
and  language  of  great  nations,  and  regulates  it  instantly.  In 
this  way,  France  and  England  are  already  bound  as  closely 
into  two  compact  wholes,  as  were  formerly  the  parishes  of 
London  or  the  arrondissements  of  Paris.  The  same  law  is  rev- 
olutionizing Italy.  In  that  country  the  long-scattered  elements 
of  homogeneity, — long  kept  by  foreign  influence  apart,  and 
in  a  condition  of  artificial  hostility  and  jealousy, — yielding 
with  hard  struggle  to  the  new  influence,  are  at  last  drawn 
together,  and  are  combining  with  each  other  as  by  chemical 
affinity.  Cavour  had  destiny  on  his  side,  and  Austria  strug- 
gled against  fate.  B\it  for  steam  the  fate  of  Italy  would  yet 
be  more  than  doubtful.     Local  jealousies,  foreign  influence. 


340  THK    KAILKOAD    SYSTEM. 

and  doiucstic  ti-eason  miglit  well  destroy  all  that  has  been 
effected.  Sicily  might  be  set  up  against  Sardinia,  and  Tus- 
cany against  Rome.  But  every  mile  of  completed  railroad 
takes  for  Italian  unity  ?  new  bond  of  fate,  —  banishes  a  little 
more  of  local  jealousy,  local  interest,  and  local  dialect,  and, 
without  the  aid  of  a  leader,  completes  the  unfinished  task  of  a 
statesman. 

The  same  phenomena  and  the  same  results  are  witnessed  in 
northern  Europe.  The  nationalities  gravitate.  The  old,  arti- 
ficial, evil  barriers  set  up  by  dynasties  upon  certain  inhuman 
theories  as  to  the  balance  of  powers  are  visibly  breaking  down. 
All  Germany,  to  its  own  great  amazement,  finds  itself  irresist- 
ibly drawn  towards  Prussia,  and  Prussia  will  very  shortly,  not 
less  to  its  own  amazement,  find  itself  (Germanized.  A  power 
stronger  than  diplomacy  or  statecraft  is  steadily  and  silently 
at  work ;  but  while,  in  one  locality,  it  compels  to  union,  in 
another  it  tears  asunder.  Germany  unites,  but  Austria,  made 
up  of  discordant  elements  which  for  centuries  have  been  re- 
tained under  one  head  by  a  skilfully  contrived  and  artificially 
stimulated  antagonism  and  jealousy  of  forces,  rapidly  finds  her 
position  becoming  untenable.  The  Hun,  the  Croat,  and  the 
Transylvanian  will  not  combine.  They  have  no  affinities  of 
race,  of  language,  or  of  interest,  —  the  ingredients  will  not 
mix.  To  yield  the  popular  reforms  insures  disintegration  :  to 
resist  them  provokes  revolution.  The  revolutions  of  the 
steam-engine  have  at  last  rendered  forever  impracticable  the 
traditional  policy  of  the  house  of  HapsV)urg. 

The  same  new  elements  are  rapidly  working  out  its  prob- 
lems for  Russia.     Not  twenty  years  ago  all  Europe  was  per- 
plexed and  alarmed  by  the  growth  and  imagined  power  of  the 
empire  of  the  Czars.     The  seeds  of  destruction  seemed,  how- 
ever, to  lie  hidden  in  the  very  successes  of  power.     It  might 
well  be  deemed  impossible  that  the  vast,  incongruous,  over-| 
grown  empire  could  remain  united  from  the  Baltic  to  thai 
Bosporus.     All  this   is  now   changed.     Within   the  hist  fewj 
years  only,  —  brought  to  it  in  great  degree  by  the  disasters] 
of  the  Crimea,  —  the  iugredieuts  have  been  cast  into  the  cru- 


THE   KKA    OF    CHANGE.  341 

cible.  Railroads  are  in  course  of  construction  all  over  the 
country,  and,  under  their  influence,  the  affinities  day  by  day 
unite.  In  a  few  years  Constantinople  will  be  nearer  to  St. 
Petersburg  than  Moscow  once  was,  and  the  whole  great  na- 
tion will  be  bound  together  hard  and  fast  by  the  iron  bands. 

On  this  continent,  our  own  country  is  the  child  of  the  loco- 
motive. With  us  it  has  neither  combined  homogeneous  ele- 
ments, nor  forced  into  conflict  those  that  were  incongruous, 
but  it  has  rapidly  disseminated  one  element  over  a  vast  wil- 
derness. The  steamboat  and  railroad  alone  have  rendered 
existing  America  possible. 

Such  are  some  of  the  results  of  peace.  The  same  force 
has  left  a  deep  mark  on  the  results  of  modern  warfare,  —  a 
mark  no  less  noticeable  from  its  absence  than  from  its  pres- 
ence. The  history  of  two  recent  wars,  not  ten  years  apart, 
perfectly  illustrates  the  possible  differences  of  result  arising 
from  the  regard  or  disregard  of  this  new  element  of  power. 
These  two  are  the  war  in  the  Crimea  and  our  own  Rebellion. 
Russia  failed  of  success  in  the  Crimea,  because  she  could  not 
avail  herself  of  the  steam-engine ;  the  Allies  succeeded,  be- 
cause they  could  avail  themselves  of  the,  steam-ship.  Mar- 
seilles and  Plymouth  were  infinitely  nearer  to  Sebastopol  than 
were  Moscow  and  St.  Petersburg.  The  new  element  of  force 
and  combination,  neglected  by  Russia  in  1854,  we  availed  our- 
selves of  with  decisive  effect  in  1864.  That  one  new  element 
of  power  —  wholly  left  out  of  their  calculations  by  European 
military  authorities  in  exercising  the  gifts  of  prophecy  on  the 
result  of  our  struggle  —  was  the  one  element  which  made 
possible  the  results  we  accomplished.  They  told  us  of  the 
vastness  of  the  territory  to  be  subdued,  of  the  impossibility  of 
sustaining  our  armies,  of  the  power  of  a  people  acting  on  the 
defensive.  They  pointed  to  Napoleon's  dismal  experience  in 
Russia,  and  wondered  and  sneered  at  those  who  would  not 
learn  from  the  experience  of  others,  or  profit  from  the  disas- 
ters of  the  past.  They  could  not  realize,  and  would  take  no 
count  of,  the  improved  appliances  of  the  age.  The  result  the 
world  knows.     It  saw  a  powerful  enemy's  very  existence  de- 


342  THK    P.AILROAD    SYSTEM. 

pending  upon  a  frail  thread  of  milroad  iron,  with  the  effectual 
destruction  of  which  perished  all  hope  of  resistance  :  it  saw 
Sherman's  three  hundred  miles  of  rear,  and  the  base  and  sup- 
plies of  eighty  thousand  fighting  men  in  secnrity  three  days' 
journey  by  mil  away  from  the  sound  of  strife;  it  saw  two 
whole  army  corps,  numbering  eighteen  thousand  men,  moved, 
with  all  their  mmiitions  and  a  portion  of  their  artillery,  thir- 
teen hundred  miles  round  the  circuraierence  of  a  vast  theatre 
of  war,  from  Virginia  to  Tennessee,  in  the  moment  of  dan- 
ger, and  this  too  in  the  apparently  incredibly  brief  space  of 
only  seven  days.  From  Alexander  to  Napoleon,  the  possibil- 
ities of  combination  in  warfare  were  in  essentials  the  same. 
Within  thirty  years  of  the  death  of  Napoleon,  that  was  ac- 
complished which  to  him  would  have  read  as  the  tale  of  some 
Arabian  Night.  The  changes  of  thirty  years  threw  deep  into 
the  shade  those  of  thirty  centuries. 

All  those  yet  referred  to  are  but  the  interior  circles  of  the 
influences  already  perceptible  from  the  disturbing  action  of 
this  one  new  force.  It  does  not  confine  itself  to  nationalizing 
each  severed  race,  but  it  cosmopolizes  nations.  It  is  in  this 
respect,  perhaps,  that  the  world  is  brought  fiice  to  face  with 
the  most  subtle  and  disturbing  influence  of  its  new  era,  —  an 
influence  of  which  the  early  quickenings  are  but  now  making 
themselves  felt,  and  the  complete  development  of  which  must 
be  the  work  of  another  century.  As  a  result  of  the  frequent 
and  easy  intercoiu-se  among  the  nations  which  has  existed  of 
late,  —  the  rapid  exchange  both  of  thought  and  of  presence, — 
there  has  arisen  a  steady  and  increasing  tendency  towards  a 
union  of  sympathetic  forces,  overcoming  the  barriers  of  lan- 
guage, habit,  and  race.  New  questions  arc  looming  uj),  involv- 
ing the  social  relations  and  the  division  of  the  finiits  of  industry, 
which  are  common  to  all  coimtries,  and  which  bid  fair  in  great 
degree  to  supersede  questions  of  local  interest.  The  two  great 
permanent  parties  into  which  mankind  must  always  be  divided 
are  thus  brought  vividly  into  the  foregi-ound  carrying  on  their 
struggle  over  these  problems  in  a  way  hitherto  unknown.  The 
innovators  strive  to  conibine  the  world  over.    They  regard  the 


THE   ERA   OF   CHANGE.  343 

peculiar  class  of  questions  with  which  they  concern  themselves 
as  overriding  all  considerations  of  religion  or  nationality,  — 
the  ancient  sheet-anchors  of  society.  They  hold  international 
congresses  and  organize  international  associations,  thus  seek- 
ing gradually  to  create  a  government  within  existing  govern- 
ments. The  end  they  keep  ever  in  view  is  such  a  close  con- 
centration of  forces  as  shall  enable  them  to  act  with  decisive 
effect  upon  any  point  of  immediate  conflict.  Meanwhile  the 
party  of  conservatism,  divided  by  traditional  lines,  seeks  con- 
tinually to  effect  the  impossible  by  struggling  to  preserve  forms 
froni  whi.ch  the  life  has  gone  out.  Hence  results  a  period  of 
transition,  marked  by  a  state  of  human  affairs  almost  wholly 
wajiting  in  the  one  element  which  mankind  most  eagerly 
covets,  that  of  stability.  The  party  of  attack  does  not  as  yet 
know  what  it  really  desires,  and  the  party  of  resistance  mainly 
sustains  itself  by  virtue  of  the  blunders  of  its  opponents.  It 
would  be  wholly  futile  to  philosophize  over  the  possible  re- 
sults of  this  wide  array  of  forces.  So  tar  as  the  facilities  of 
intercourse  affect  them,  the  issue  would  seem  to  be,  whether, 
in  the  process  of  time,  a  unity  of  end  among  men  may  be 
brought  to  override  the  prejudice  of  race.  The  most  advanced 
portions  of  the  world  are  unquestionably  still  far  fi'om  any 
such  result ;  this  description  of  mobilization  is  hardly  yet 
begun.  At  the  same  time  passing  events  in  Europe  would ' 
seem  to  indicate  that  the  seed  may  now  be  sown  broadcast, 
which  is  destined  to  grow  until  it  shall  shatter  the  whole  fabric 
of  modern  society. 

Hitherto  this  tendency  to  assimilation  has  expended  itself 
in  the  reduction  of  difterences.  Much  in  the  way  of  destruc- 
tion yet  remains  to  be  done  before  the  plan  of  construction 
can  reveal  itself  Meanwhile  an  incessant  wearing  away  of 
individual  characteristics  is  very  perceptible.  More  notably  is 
this  the  case  as  regards  the  outward  aspect  of  civilized  countries. 
Since  1830  all  the  world  travels.  Already  the  whole  Cau- 
casian race  looks  alike  and  talks  alike,  and  is  rapidly  growing 
to  live  alike  and  to  think  alike.  We  mix  and  mingle,  until 
there  is  no  strangeness  left.     Those  of  middle  life  yet  remem- 


344  THE    RAILROAD   SYSTEM. 

ber  Paris  and  London  in  the  days  of  the  diligence  and  the 
stage-coach  ;  and  Rome  has  come  directly  within  the  influence 
of  railroads  only  within  the  last  ten  years ;  but,  after  all,  the 
mushi'oom  cities  of  America,  in  their  very  brick  and  mortar, 
—  in  the  architecture  of  their  buildings  and  the  age  of  their 
walls,  —  are  the  same  in  appearance,  and  just  as  ancient,  as 
modern  London  or  Paris.  We  dream  of  England  as  old ;  we 
dwell  upon  the  descriptions  of  English  humorists,  and  picture 
to  ourselves  the  quaint  rambling  inns  and  familiar  streets  of 
Dickens,  —  the  haiuits  of  Dr.  Johnson  and  of  Boswell,  —  the 
spots  made  familiar  by  Irving  and  his  great  progenitor  who 
showed  old  Sir  Roger  the  sights  of  the  town ;  we  insensibly 
associate  with  modern  London,  in  childlike  fancy,  the  familiar 
scenes  of  English  literature,  from  Prince  Hal  and  Jack  Falstaif 
at  the  Boar's  Head  Inn  to  Mr.  Pickwick  snuffing  the  morn- 
ing air  in  Goswell  Street.  We  still  go  to  that  city  vaguely 
exi)ecting  to  find  the  quaintness  we  imagine ;  at  any  rate, 
we  do  not  look  for  what  we  left  behind  us  in  America. 
Probably  some  of  this  quaintness  did  until  recently  linger 
about  London.  But  though  1829  did  not  work  all  its  changes 
at  once,  the  old  and  quaint  went  out  with  stage-coaches.  To- 
day we  might  as  well  look  for  traces  of  the  Indians  on  Bos- 
ton Common,  or  of  the  renowned  Wouter  Van  Twiller  on 
Manhattan  Island.  Paris  and  London  have  yielded  to  the 
new  influence,  and  are  givuig  up  their  distinctive  characteris- 
tics, to  beconie  the  stereotyped  railroad  centres  of  the  future. 
Rome,  under  the  influence  of  the  Papacy,  resisted  the  revolu- 
tion a  little  longer  ;  and  there,  until  recently,  the  traveller 
could  yet  dwell  a  moment  with  the  past,  and  enjoy  an  instant's 
forgetfulno.ss  of  the  wearying  march  of  progress.  But  even 
there  the  shrill  scream  of  the  steam-whistle  broke  the  silence 
of  the  Campagna,  and  a  steam-engine  had  possession  of  the 
palace  of  the  Ccnci. 

At  home,  too,  we  notice  similar  change.  The  Revolution 
has  swept  away  the  last  vestiges  of  colonial  thoughts  and 
persons.  Who  that  has  ever  fonnerly  lived  in  a  New  Eng- 
land country  town  does  not  remember  its  old  quiet  and  dul- 


THE   ERA   OF   CHAxXGE.  345 

ness,  its  industry,  the  slow,  steady  growth  of  its  prosperity, 
and  the  staidness  of  its  inliabitants  1  There,  also,  yoi\  met  a 
class  of  men  now  wholly  gone,  —  dull,  solid,  elderly  men,  men 
of  some  property  and  few  ideas,  —  the  legitimate  descendants 
of  the  English  broad-acred  squires.  They  were  the  gentry, 
—  the  men  who  went  up  to  the  Genei'al  Court,  and  had  been 
members  of  the  Governor's  Council ;  they  were  men  of  formal 
bearing  and  of  formal  dress,  —  men  who  remembered  Governor 
Hancock,  and  had  a  certain  trace  of  his  manners.  To-day  this 
class  is  extinct.  Railroads  have  abolished  them  and  their 
dress  and  their  habits,  —  they  have  abolished  the  veiy  houses 
they  dwelt  in.  The  race  of  hereditary  gentry  has  gone  for- 
ever, and  the  race  of  hereditary  business-men  has  usurped  its 
place.  They  represent  the  railroad,  as  the  earlier  type  did 
the  stage-coach. 

The  same  phenomena  are  witnessed  in  the  regions  of  thought. 
It  is  bolder  than  of  yore.  It  exerts  its  influence  with  a  speed 
and  force  equally  accelerated.  The  newspaper  press  is  the 
great  engine  of  modern  education ;  and  that  press,  obeying 
the  laws  of  gravitation,  is  everywhere  centralized,  —  the  rays 
of  light  once  scattered  are  concentrated  into  one  all-powerful 
focus.  To-day's  metropolitan  newspaper,  printed  by  a  steam- 
press,  is  whirled  three  hundred  miles  away  by  a  steam-engine 
before  the  day's  last  evening  edition  is  in  the  hands  of  the 
carrier.  The  local  press  is  day  by  day  fighting  a  losing  cause 
with  diminished  strength,  while  the  metropolitan  press  drives 
it  out  of  circulation  and  filches  from  it  its  brain.  Ideas  are 
quickly  exchanged,  and  act  upon  each  other.  Nations  can  no 
longer,  except  wilfully,  persist  in  national  blunders.  Litera- 
tures can  no  longer  lie  hid  as  did  the  German  until  so  few 
years  ago.  Since  1830  the  nations  are  woven  together  by  the 
network  of  iron,  and  all  thought  and  results  of  thought  are 
in  conunon.  The  same  problems  perplex  at  once  the  whole 
world,  and  from  every  quarter  light  floods  in  upon  their  solu- 
tion. But  increased  communication  has  not  alone  quickened 
and  intensified  thought,  —  it  has  revolutionized  its  process. 
One  great  feature  of  the  future  must  bie  the  rapid  uprising 
15* 


346  THE   RAILROAD   SYSTEM. 

of  new  communities.  Of  all  such  communities  questioning 
is  a  leading  characteristic.  They  have  neither  faith  in,  nor 
reverence  for,  that  which  is  old.  On  the  contrary,  with  them 
age  is  a  strong  jjriina  facie  evidence  of  badness,  and  they  love 
novelty  for  novelty's  sake.  This  mental  inclination  will  ulti- 
mately apply  the  last  test  to  truth,  for  error  has  its  full  chance 
and  is  sure  of  a  trial.  The  burden  of  proof  seems  likely  to  be 
shifted  from  the  innovator  to  the  conservator. 

It  is  in  the  domains  of  trade,  however,  that  the  revolution 
is  the  most  apparent  and  bewildering,  —  that  the  sequences 
of  cause  and  effect  are  most  innumerable  and  interminable. 
Herbert  Spencer  says  that  it  would  require  a  volume  to  trace 
through  all  its  ramifications  the  contingent  effects  of  the  every- 
day act  of  lighting  a  fire.  These  effects  are  imperceptible,  but 
the  influence  of  steam  locomotion  as  applied  to  trade  is  as 
apparent  as  it  is  infinite.  In  this  respect  steam  has  proved 
itself  to  be  not  only  the  most  obedient  of  slaves,  but  likewise 
the  most  tyrannical  of  masters.  It  pulls  down  as  well  as 
builds  up.  The  very  forces  of  nature  do  not  stand  in  its  way. 
It  overcomes  the  wind  and  tide,  and  abolishes  the  Mississippi 
River.  It  is  as  whimsical  as  it  is  powerful.  The  individual  it 
carries  whithersoever  he  will,  but  whole  communities  it  carries 
whither  they  would  not.  It  makes  the  grass  grow  in  the  once 
busy  streets  of  small  commercial  centres,  like  Nantucket,  Sa- 
lem, and  Charleston.  It  robs  New  Orleans  of  that  monopoly 
of  wealth  which  the  Mississippi  River  once  promised  to  pour 
into  her  lap.  It  threatens  to  make  a  solitude  of  the  once  busy 
wharves  of  Boston,  and  it  fills  New  Hampshire  with  deserted 
farms.  For  some  mysterious  reasons  which  it  will  never  dis- 
close, it  carries  wealth  and  importance  past  one  threshold  that 
it  may  lay  them  down  at  another.  The  old  channels  of  com- 
merce are  broken  up,  and  the  points  which  depended  upon  them 
are  left  to  philosophize  upon  the  mutability  of  luunan  affairs  in 
forgotten  obscurity,  Mcauxfhilo  San  Francisco  and  Chicago 
spring  up  like  a  very  palace  of  Aladdin,  and  the  centre  of 
population  is  transferred,  as  if  by  magic,  to  some  point  which 
existed  in  the  school-books  of  the  present  generation  of  men 


THE   ERA   OF   CHANGE.  347 

only  as  a  howling  wilderness.  Meanwhile  prices  seek  a  level ; 
produce  is  exchanged ;  labor  goes,  where  it  is  needed.  Eng- 
land and  Rnssia  exchange  bread  for  cotton,  and  Iowa  and  Ire- 
land, labor  for  corn.  These  countries  are  nearer  to  one  another 
now  than  in  1829  were  the  very  counties  of  England.  In- 
creased activity  demands  new  centres  and  channels,  and  those 
phenomena  result  which  men  call  railroad  centres,  the  appari- 
tion of  which  on  the  face  of  the  earth  is  confounding  and  puz- 
zling all  thinking  men.  At  the  time  of  the  great  plague,  just 
before  the  fire  of  1666,  De  Foe  estimated  the  population  of 
London  at  one  million  soiils  ;  but  Macaulay  places  it,  more 
accurately,  for  about  the  same  time,  at  500,000.  In  the 
succeeding  century  and  a  half  it  increased  about  threefold, 
until,  in  1831,  it  numbered  1,600,000.  The  new  era  then 
commenced,  and  fi'om  that  time  the  growth  of  London  was 
almost  to  be  dated.  During  the  next  twenty  years  its  popu- 
lation had  risen  to  2,500,000  ;  and  to-day  it  contains  within 
its  limits  hardly  less  than  4,000,000  of  human  beings.  Be- 
tween 1666  and  1821  it  had  a  growth  of  three  hundred  per 
cent,  and  it  has  experienced  nearly  similar  increase  between 
1821  and  1871.  When  Fulton  steamed  up  the  Hudson,  Paris 
was  a  city  of  rather  more  than  half  a  million  of  inhabitants, 
and  it  now  numbers  about  2,000,000.  In  the  days  of  Louis 
XIV.  it  had  490,000,  and  in  1841,  912,000,  — an  increase 
of  one  hundred  per  cent  in  two  centuries.  In  1866  it  had 
1,825,000,  —  an  increase  of  one  hundred  per  cent  in  twenty- 
five  years. 

The  results  in  America  have  been  no  less  extraordinary. 
In  1807  New  York  numbered  a  population  of  about  75,000. 
(Chicago  existed  in  1829  only  as  an  uninviting  swamp  in- 
habited by  a  dozen  families,  and  San  Francisco  was  hardly  a 
name.  In  1830  New  York  contained  over  200,000  inhabi- 
tants ;  and  to-day  they  exceed  900,000,  without  considering 
those  suburbs  which  enter  so  largely  into  the  bulk  of  Loudon 
and  Paris.  Between  1829  and  1870  Chicago  had  increased  to 
300,000,  and  San  Francisco  since  1847  has  become  a  city  of 
150,000  inhabitants. 


348  THE  RAILROAD  SYSTEM. 

Nearly  twenty  years  ago  Macaulay  called  attention  to  the 
fearful  human  material  of  which  this  growth  was  composed. 
He  then  referred  to  the  arguments  used  by  Gibbon  and  Adam 
Smith  to  prove  that  the  world  would  not  again  be  flooded  with 
barbarism  ;  and  he  remarked  that  it  had  not  occurred  to  those 
philosophers  "  that  civilization  itself  might  engender  the  bar- 
barians who  should  destroy  it.  It  had  not  occurred  to  them 
that  in  the  very  heart  of  great  capitals,  in  the  neighborhood 
of  splendid  palaces  and  churches  and  theatres  and  libraries 
and  museums,  vice  and  ignorance  might  produce  a  race  of 
Huns  fiercer  than  those  who  marched  under  Attila,  and  of 
Vandals  more  bent  on  destruction  than  those  who  followed 
Genseric."  When  Macaulay  used  these  words  in  Edinburgh 
in  1852,  he  could  hardly  have  realized  that  the  growth  of 
those  gi'eat  cities  was  but  just  begun  ;  but  since  that  time 
London  has  increased  fifty  per  cent,  and  the  "  Vandals  "  of  Paris 
have  recently  given  a  point  to  his  well-balanced  period  which 
it  never  had  before.  For  America,  and  the  permanence  of 
lepublican  institutions,  this  tendency  of  population  to  concen- 
trate at  great  railroad  centres,  cannot  fail  to  be  a  subject  for 
anxious  consideration.  The  success  of  popular  government 
must  depend  solely  upon  the  virtue,  the  intelligence,  and  the 
public  spirit  of  the  people  governed.  As  long  as  the  members 
of  any  commiinity  can  be  approached  by  reason,  or  by  argu- 
ment, or  by  considerations  of  the  public  good,  there  is  no  soiuid 
cause  to  despair  of  the  safety  of  any  republic.  It  is  useless, 
however,  to  hope  or  to  struggle  for  that  safety  for  any  length 
of  time  after  one  party  has  fii-mly  established  its  power  upon 
the  basis  of  an  ignorant,  unapproachable  proletariat.  The 
tendency  of  all  self-governed  great  cities  is  inevitably  towards 
this  political  control  through  the  agency  of  irresponsible  masses. 
The  history  of  Athens  and  of  Rome  is  continually  repeating  it- 
self, and  never  has  its  reproduction  diHj)laycd  features  more 
closely  resembling  the  great  originals  than  now  in  the  lead- 
ing municipalities  of  America.  In  what  respect,  except  in 
name,  does  the  city  of  New  York  enjoy  a  republican  fonn  of 
government  1     Yet  the  difference  between  New  York  and  the 


THE   ERA   OF   CHANGE.  349 

other  great  cities  of  the  continent  is  simply  one  of  degree. 
The  same  tendencies,  which  must  inevitably  lead  to  the  same 
results,  are  manifest  everywhere.  The  dense  aggregation  of 
mankind  may  be  said  to  necessarily  result  in  an  upper  class 
which  wants  to  be  governed,  and  in  a  lower  class  which  has 
to  be  governed.  The  extreme  of  luxury  and  the  extreme  of 
misery  are  equally  fatal  to  public  virtues ;  and  no  one  can 
dovibt  that  the  great  cities  of  the  future  are  destined  infinitely 
to  surpass,  both  as  regards  luxury  and  miser}',  anything  of  the 
kind  which  the  world  has  yet  seen.  This  must  result  from 
the  mere  progress  of  railroad  development.  It  is  no  less  cer- 
tain that  republican  America  is  destined  very  shortly  to  be 
dotted  all  over  with  these  centres  of  population.  Created  by 
railroads,  the  railroads  lend  to  them  a  gravitating  influence 
both  moral  and  political  which  cannot  be  ignored.  To  hope 
for  a  pure  government  by  the  people  at  large  while  ignorance 
and  corruption  are  the  ruling  forces  in  these  centres,  is  as 
futile  as  it  would  be  to  look  for  healthy  members  where  the 
vitals  are  diseased.  This  it  is  which  really  constitutes  that 
problem  of  great  cities  which  so  confounds  the  friends  of  popu- 
lar government. 

Meanwhile  the  influence  of  this  railroad  power  upon  the 
politics  of  America  and  the  political  theories  at  the  base  of 
party  organizations  has  been  very  strongly  defined  and  little 
considered.  Paradoxical  as  it  sounds,  it  has  actiially  made 
that  which  was  mistaken,  right,  and  that  which  was  danger- 
ous, safe.  The  year  1830  was  a  year  of  political  revolution 
in  America,  —  the  friends  of  a  strong  central  government  went 
out  of  power,  and  a  party  hostile  in  theory  to  all  concentration 
of  governmental  functions  came  in.  It  can  now  hardly  admit 
of  a  doubt  that  both  parties  to  that  bitter  and  memorable 
struggle  were  right,  and  it  is  equally  true  that  both  were 
wrong.  Both,  however,  were  made  right  or  wrong  by  one 
clement  which  entered  into  the  practical  solution  of  the  ques- 
tions agitated  with  decisive  consequences,  —  an  element  wholly 
unanticipated  by  either  side,  — the  clement  of  improved  loco- 
motion.    It  may  now  with  safety  be  premised  that  a  strong 


350  THE   RAILROAD    SYSTEM. 

central  government  was  a  political  necessity  for  the  United 
States  of  a  time  anterior  to  1830 ;  that  in  this  respect  Hamil- 
ton was  right  and  Jefferson  was  wrong.     It  maj'  also,  with 
equal  safety,  be  asserted  that  a  strong  central  government  con- 
stitutes a  continually  increasing  political  danger  for  the  United 
States  of  the  period  subsequent  to  1830 ;  that  the  school  of 
Hamilton  is  wrong,  and  the  school  of  Jefferson  is  right.     An 
equally  thoughtful  and  observant  man  would  thus  have  been 
a  Hamiltonian  up  to  1830,  and  a  Jeffersonian  subsequently 
to  that   date.     During  the  first  period  he  would  have  seen 
a  country  of  vast  dimensions  and  sparsely  settled,   without 
means  of  communication  or  diversified  industries,  full  of  local 
jealousies  and  destitute  of  any  recognized  centre  of  thought  or 
business,  —  a  country,  in  short,  in  constant  danger  of  going  to 
pieces  from  lack  of  cohesion,  —  a  country  in  which  the  cen- 
trifugal force  continually  tended  to  overpower  the  centripetal. 
Then  the  railroad  system  sprang  into  being,  and  all  this  rap- 
idly changed,  —  science  suddenly  supplied  that  cohesion  which 
it  had  been  the  groat  study  of  the  statesman  to  provide.    The 
point  from  which  danger  was  to  be  anticipated  thus  gi'adually 
passed  to  the  other  side  of  the  circle,  —  everything  centralized 
of  itself,  —  all   things   gravitated  :    the   unaided   centripetal 
force  was  clearly  overcoming  the  centrifugal.     Thus  the  error 
of  yesterday  had  become  the  truth  of  to-day,  and  the  only 
men  who  were  hoi)eles8ly  wrong  were  the  thoroughly  consist- 
ent.    The  world  at  large  rarely  allows  for  these  changes  of 
conditions ;  a  statesman  or  a  political  party  must  stand  or  fall 
with  the  permanence  of  that  policy  with  which    they  have 
identified  themselves,  and  posterity  rarely  stops  to  consider 
how  circumstances  have  altered  cases.     Yet  it  is  none  the 
less  true  that  the  inventions  of  Robert  Fulton  and  George 
Stephenson  settled,  in  the  minds  of  all  thinking  men,  those 
great  questions  of  internal  policy  for  the  United    States  gov- 
ernment  which   were  so  fiercely  contested  in  the  first  cabi- 
net  of  Washington  ;    and   the  way    in   which   they  settled 
them  was  by  altering  every  condition  of  the  problem.     The 
destinies  of  nations  are,  perhaps,  very  much  more  frequently 


THE   ERA   OF   CHANGE.  351 

decided  in  the  workshops  of  mechanics  than  in  the  councils  of 
princes. 

The  influence  of  this  same  power  has,  however,  made  itself 
felt  by  the  people  of  the  United  States  in  their  political  ca- 
pacity more  recently  and  in  another  way,  though  the  sequel 
of  this  last  experience  is  yet  to  be  developed.  The  war  of  the 
rebellion  left  the  United  States  heavily  burdened  with  debt, ' 
iipon  which  a  high  rate  of  interest  had  to  be  paid,  while  its 
people  were  at  once  infected  with  a  mania  for  speculation  and 
debauched  by  an  irredeemable  paper  currency.  A  system  of 
taxation  was  in  \ise  calculated  to  excite  in  equal  degrees  the 
wonder  and  contempt  of  all  future  students  of  fiscal  problems. 
Under  these  circumstances  the  shrewdest  men  of  business  were 
always  predicting  an  immediate  and  wide-spread  commercial 
catastrophe,  and  the  more  cunning  politicians  hastened  to  con- 
ciliate the  spirit  of  repudiation,  which  they  asserted  was  siire 
to  rise  up.  History  furnished  no  precedent  which  would  lead 
any  political  economist  to  suppose  that  a  currency  once  greatly 
debased  would  ever  appreciate  through  a  regular  and  healthy 
process ;  and  the  statesman  could  not  but  see  with  alarm  evi- 
dences of  indebtedness  passing  out  of  the  country  into  foreign 
hands  by  the  hundreds  of  millions.  It  is  not  too  much  to  say 
that  the  financial  history  of  the  six  years  between  1865  and 
1871  falsified  every  prediction  ever  made  as  regards  it.  No 
wide-spread  commercial  crisis,  no  general  collapse  of  private 
credit  took  place  in  America,  nor  did  that  one  which  swept 
over  England  cross  the  Atlantic  ;  the  public  debt  was  steadily 
decreased,  and  the  interest  upon  it  was  cheerfully  paid ;  the 
spirit  of  repudiation  ruined  in  its  early  death  the  hopes  of 
numerous  political  charlatans ;  the  currency  rapidly  appreci- 
ated to  its  gold  value,  while  the  mass  of  indebtedness  against 
the  country  held  in  foreign  hands  constantly  increased,  and 
showed  no  signs  of  a  return  for  redemption. 

The  simple  truth  was  that,  through  its  energetic  railroad 
development,  the  country  then  was  producing  real  wealth  as 
no  country  ever  produced  it  before.  Behind  all  the  artificial 
inflation,  which,  if  the  experience  of  the  past  was  worth  any- 


352  THE  RAILROAD  SYSTEM. 

thing,  so  clearly  foreshadowed  a  catastrophe,  there  was  also 
going  ou  a  production  which  exceeded  all  experience.  This 
new  element  vitiated  the  best  i-easoued  conclusions.  The  rail- 
road system,  acting  upon  undeveloped  and  inexhaustible  natu- 
ral resources,  dragged  the  country  through  its  difficulties  in 
spite  of  itself,  —  it  actually  seemed  as  though  fraud,  ignorance, 
and  speculation  combined  were  unable  to  precipitate  disaster. 
While  all  of  these  agents  were  noisily  at  work,  every  niile 
of  railroad  constructed  was  quietly  adding  many  times  its  cost 
to  the  aggregate  wealth  of  the  country,  —  the  tonnage  carried 
over  the  new  roads  built  each  year  was  many  hundreds  of  mil- 
lions in  value,  while  that  of  the  old  roads  always  increased,  so" 
that  the  estimated  average  of  annual  transportation,  which 
was  but  $85  for  each  inhabitant  of  the  country  in  1860,  had, 
in  1870,  risen  to  $300. 

Such  an  increase  in  actual  production  could  alone  account 
for  the  general  setting  aside  of  all  the  lessons  of  the  past. 
Not  the  least  instructive  part  of  this  experience  was,  perhaps, 
the  complacency  with  which  a  certain  class  of  philosophers 
mistook  the  operation  of  a  gi'eat,  quiet,  natural  force  for  tlie 
results  of  their  own  meddling.  One  school  attributed  the 
freedom  from  commercial  disaster  to  the  ju^le  of  paper 
money.  Another  saw  in  the  great  prosperity  of  the  day 
nothing  but  a  vindication  of  the  absurdities  of  i)rotection. 
While  sciolists  talked,  however,  the  locomotive  was  at  work, 
and  all  the  obstructions  which  they  placed  in  its  way  could  at 
most  only  check  but  never  overcome  the  impetus  it  had  given 
to  material  progress. 

The  same  direct  influences  could  unquestionably  be  traced 
into  morals,  which  have  been  observed  in  other  departments 
of  life.  The  laws  of  combination  and  gravitation  apply  to 
ethics  no  less  than  trade.  Here,  however,  it  is  far  more 
difficult  than  elsewhere  to  strike  the  balance  of  profit  and 
loss.  Whether  the  world,  as  a  whole,  is  better  or  worse 
than  it  was  forty  years  ago  is  a  point  upon  which  the  statisti- 
cian can  as  yet  throw  little  hglit,  and  concerning  which  the 
divergence  of  opinion  between  the  old  and  the  young  is  a^jt  to 


THE  ERA   OF   CHANGE.  353 

be  excessive.  One  thing  is  very  clear,  the  golden  age  of  purity 
and  simplicity  has  always  lain  behind  us  ever  since  those  early 
times  when  it  was  first  created  in  the  imagination  of  the  earli- 
est poets.  We  never  realize  how  bad  the  old  times  were,  until 
we  come  to  grope  amid  the  happily  forgotten  records  of  their 
filthy  vices. 

Such  is  a  passing  sketch  of  some  of  the  disturbing  influ- 
ences of  the  new  power  on  the  general  aspect  of  the  century, 
—  influences  so  all-pervading  in  their  results  as  to  be  rather 
revolutionizing  than  disturbing.  Whatever  affects  the  whole 
affects  every  part.  It  would  therefore  be  mere  waste  of  time 
to  follow  out  with  curious  assiduity  the  myriad  remoter  rami- 
fications, until,  among  larger  incidents  of  change,  we  should 
find  the  possibilities  of  emigration  modifying  for  a  time  the 
terrible  truth  of  the  Malthusian  theory  of  population,  and  the 
exodus  of  the  nations  going  quietly  on  before  our  eyes  upon  a 
scale  which  reduces  to  insignificance  the  largest  of  those 
human  tides  the  flow  of  which  is  traced  through  -the  pages  of 
Gibbon ;  or  we  might  see  the  Highlander  expelled  from  the 
mountain  fastnesses  of  his  clan,  because  the  railroad  has  made 
them  so  accessible  as  a  pleasure-ground  to  the  English  noble- 
man, and  a  writer  like  John  Stuart  Mill  forced  to  declare  that 
so  wonderful  are  the  changes,  both  moral  and  economical, 
taking  place  in  our  age,  that,  without  perpetually  rewriting  a 
work  like  his  "  Elements  of  Political  Economy,"  it  is  impossi- 
ble to  keep  up  with  them.  Such  would  be  the  instances 
among  nations  and  authors,  and,  descending,  we  should  see 
the  increased  demand  for  a  cheap  press  influencing  the  price 
of  rags  in  a  coi;ntry  village,  and  the  increased  use  of  lubri- 
cating oil  compensating  to  the  fisheries  for  the  innovation 
of  gas.  All  of  these,  too,  are  the  revolutions  worked  in  a 
single  half-century  by  a  force  which  is  as  yet  bound  up  in  its 
swaddling-clothes.  Its  iron  arms  have  been  stretched  out  in 
every  direction  ;  nothing  has  escaped  their  reach,  and  the  most 
firmly  established  institutions  of  man  have  proved  under  their 
touch  as  plastic  as  clay.  Everything  is  changing,  and  will 
change  with  increasing  rapidity.     No  human  power  can  stop 


354  THE  RAILROAD  SYSTEM. 

it.  It  is  useless  to  cast  back  regretful  glances  at  the  old  quiet 
days  of  other  years  and  another  order  of  things,  —  at  tlie 
middle  ages  antecedent  to  1807.  The  progressive  may  exiUt, 
and  the  conservative  may  repine,  but  the  result  will  be  all  the 
same.  We  must  follow  out  the  era  on  which  we  have  entered 
to  its  logical  and  ultimate  conclusions,  for  it  is  useless  for  men 
to  stand  in  the  way  of  steam-engines.  Change  is  usually  ugl}', 
and  the  whole  world,  both  physical  and  moral,  is  now  in  a 
period  of  transition.  But  the  serpent  does  not  cast  his  skin 
till  the  new  one  is  formed  beneath  the  old ;  and  because  the 
old  world  is  now  sloughing  its  skin,  we  cannot  conclude  that 
the  world  of  the  future  is  to  exist  without  one. 

"  To-day  I  saw  the  dragon-fly 
Come  from  the  wells  where  he  did  lie. 

"  An  inner  impulse  rent  the  veil 
Of  his  old  husk ;  from  head  to  tail 
Came  out  clear  plates  of  sapphire-mail. 

"  He  dried  his  wings;  like  gauze  they  grew; 
Through  crofts  and  pastures  wet  with  dew, 
A  living  flash  of  light  he  flew." 

It  would  be  simply  presumptuous  to  try  to  cast  the  horo- 
scope of  this  revolution  after   thus   surveying   the   changes 
already  wrought.     If  we  wished  to  draw  a  few  feeble  infer- 
ences to  reassure  ourselves  in  regard  to  the  future,  we  could 
best   do    so  b     falling  back  on  the    analogies   of   the  past. 
The  changes  of  the  future  will  undoubtedly  be  more  rapid, 
more  complete  and  more  bewildering  than  those  of  the  past, 
in  the  samp  ratio  that  the  combined  forces  now  at  work  are 
engines  more  powerful  for  change  than  the  comparatively  sim-j 
pie  ones  of  the  earlier  days.     Still,  tlic  ptust  cannot  but  throw] 
some  light  on  the  future.     To  the  dwellers  in  it,  the  world] 
doubtless  seemed  stifficiently  lovely  before  the  middle  of  tlieij 
fifteenth  century  ;  but  then  the  sloughing-time  came  on,  audi 
the  old  skin  was  slowly  shed,  and,  in  the  ripeness  of  time,  the 
new  was  found  better.     The  old  passed  away  amid  the  fierce  | 
contortions  of  tortured  communities,  — through  wars  and  revo- 
lutions and  inquisitions  and  anarchy.     The  period  of  change  < 


THE   ERA   OF   CHANGE.  355 

was  ugly,  and  mankind  often  had  cause  for  discouragement ; 
but  the  worst  times  were  found  bearable,  and  the  result  has 
justified  the  price.  Our  era  has  just  begun  to  work  its  own 
revolution.  That  its  results  will  all  be  pleasant,  we  may  not 
hope  ;  that  its  course  will  be  marked  by  fierce  agonies,  we  have 
been  fully  taught  by  the  events  of  the  last  few  years ;  but  that 
it  will  in  the  end  serve  to  elevate  and  make  more  happy  the 
whole  race  of  man  upon  earth,  we  have  some  cause  to  trust. 
Yet  in  surveying  the  history  of  the  last  great  era  just  finished, 
—  the  distinctive  era  of  the  printing-press,  with  all  its  changes 
from  1444  to  1807,  — the  imagination  is  bewildered  and  lost 
in  the  vain  effort  to  realize  those  more  striking  changes  which 
are  to  make  remarkable  the  new  era  upon  whiich  we  have  just 
entered,  —  the  distinctive  era  of  steam  locomotion. 


CHAPTER    II 


THE   TRANSPORTATION    TAX. 


IF  by  Free  Trade  is  meant  the  unrestricted  exchange  of 
the  products  of  their  industry  among  the  peoples  of  the 
earth,  George  Stephenson  more  than  any  other  man  deserves 
to  be  called  the  great  practical  Free  Trader.  His  invention 
went  very  far  towards  abolishing  the  one  sure  basis  of  the 
whole  protective  system,  —  the  one  tax  for  which  not  Adam 
Smith  nor  Cobden,  neither  abstract  reason  nor  corn-law  leagues, 
could  suggest  any  measure  of  repeal.  Stephenson  took  ofF 
from  the  world  at  large  four  fifths  of  the  transportation  tax. 
During  the  last  quarter  of  a  century  it  may  be  said  that  the 
whole  efforts  of  the  protectionist  school  have  been  concentrated 
upon  the  attempt  to  replace,  in  the  form  of  an  arbitrary  impost, 
a  portion  of  that  burden  which  the  improved  facilities  of  trans- 
portation had  removed  from  human  industry.  Meanwhile  apt 
illustrations  are  not  far  to  seek  of  the  part  which  the  railroad 
system  has  borne  in  the  great  work  of  bringing  the  price  of 


35G  THE   KAILKOAD    SYSTEM. 

things  in  their  place  of  consumption  as  neai'  as  possible  to  their 
price  in  that  of  production.  Perhaps  as  striking  an  example 
of  this  as  could  be  found  is  presented  in  the  case  of  the  lead- 
ing material  interest  of  the  American  people,  —  the  produc- 
tions of  agriculture,  and  more  especially  com  and  wheat. 
Formerly,  upon  the  old  highways,  it  cost  as  much  to  carry  a 
bushel  of  com  125  miles,  or  a  bushel  of  wheat  250  miles,  as 
either  of  these  articles  was  worth.  The  railroad  has  increased 
this  distance  of  possible  carriage  twentyfold.  In  other  words, 
it  now  costs  less  to  carry  a  given  quantity  of  com  or  wheat 
from  Boston  to  San  Francisco  by  rail,  than  forty  years  ago  it 
would  have  cost  to  carry  the  same  quantity  by  the  highway 
from  Boston  to  Albany.  Where,  therefore,  formerly  a  given 
centre  could,  as  regards  these  cereals,  hold  tributary  to  it, 
through  land  carriage  and  before  all  value  was  exhausted, 
only  some  50,000  square  miles,  or  a  region  of  about  the 
area  of  New  York,  it  can  now  hold,  at  the  same  cost,  over 
8,000,000  square  miles,  or  more  than  twice  the  area  of  the 
whole  United  States. 

Taking  this  given  point  as  a  centre,  therefore,  it  follows  that 
a  slight  fractional  increase  or  decrease  in  the  transportation 
tax  must  add  to  it  or  strike  from  it  thousands  of  square  miles 
of  tributary  area.  For  instance,  Chicago  is  the  great  produce 
market  of  the  country,  and  New  York  is  its  commercial  centre. 
The  distance  from  one  point  to  the  other  is  a  thousand  miles. 
In  these  days  of  fierce  competition,  five  cents  a  bushel  is  no 
small  fluctuation  --—  loss  or  gain  —  for  the  dealers  in  corn  and 
wheat.  As  a  part  of  the  transportation  tax  between  Chicago 
and  New  York  this  important  variation  of  five  cents  a  bushel 
represents  the  merest  trifle  more  than  one  mill  and  one  half 
per  ton  per  mile.  To  the  producers  of  a  very  large  portion 
of  the  interior  of  the  continent,  therefore,  a  matter  of  two 
mills  a  ton  per  mile  in  freights  must  necessarily  involve  the 
whole  difference  between  a  profit  and  a  loss  on  their  annual 
industry. 

Exception  may  perhaps  bo  taken  to  the  xisc  of  the  odious 
word  "  tax,"  in  connection  with  the  charge  imposed  for  carriage 


THE   TRANSPORTATION   TAX.  357 

by  rail.  It  may  be  said  that  this  is  a  tax  in  no .  other  sense 
than  a  charge  for  any  other  necessary  service  rendered  is  a 
tax.  Usage  and  long-established  anthority  have,  indeed,  fixed 
upon  this  word  a  meaning  which  is  too  exclusively  political,  — 
as  though  some  form  of  government  could  alone,  and  solely 
for  its  own  purposes,  impose  a  pecuniary  burden  under  the 
name  upon  the  wealth  of  a  community.  Such  a  definition  is 
open  to  serious  objections.  It  not  only  creates  a  mischievous 
confusion  of  ideas,  but  it  actually  deceives  the  community  as 
to  the  extent  and  unnecessary  nature  of  many  of  the  burdens 
under  which  it  labors.  The  burden  of  taxation,  as  it  is  called, 
is  crudely  measured  by  the  proportion  which  the  public  reve- 
nue bears  to  the  numbers  or  supposed  wealth  of  any  commu- 
nity as  expressed  in  the  census.  Such  a  measure  is  fallacious 
in  the  extreme.  A  tax  is  not  only  a  contribution  taken  directly 
from  the  resources  of  any  community  for  governmental  or 
public  uses,  but,  in  its  general  significance,  it  is  also  any  bur- 
den, natural  or  artificial,  which,  without  altering  the  intrinsic 
value,  the  quality,  or  the  quantity  of  raw  material,  adds  to  its 
cost  before  it  reaches  the  consumer. 

It  is  an  elementary  principle  of  political  economy,  that  all 
wealth  comes  from  the  soil ;  neither  human  industry  nor  hu- 
man ingenuity  can  produce  any  addition  to  the  material  pos- 
sessions of  mankind,  except  from  the  earth.  Everything  pro- 
duced from  the  earth,  moreover,  is  valuable  only  in  so  far  as 
some  one  wants  it  and  is  willing  to  exchange  labor  or  its  prod- 
ucts for  it.  Speaking  somewhat  loosely,  all  mankind  may, 
then,  be  divided  into  the  two  great  classes  of  consumers  and 
pi'oducers,  — to  the  first  of  which  eveiy  hmnan  being,  and  to 
the  last  of  which  the  vast  majority  of  mankind,  belongs.  Be- 
tween the  producer  of  the  raw  material  and  the  consumer  there 
comes  an  intermediate  class,  the  possessorspf  skilled  labor,  those 
who  by  their  industry  lend  an  additional  intrinsic  value  to  fSie 
raw  material.  Such  ai"e  all  manufacturers.  The  sum  total, 
therefore,  of  the  wealth  of  any  community  and  of  the  whole 
world  consists  of  all  that  which  it  has  extorted  from  the  earth, 
enriched  by  any  factitious  value  which  may  have  been  added  to 


358  THE   RAILROAD   SYSTKM. 

it.  These  two  elements  of  coBt  —  production  and  manufac- 
ture —  are  necessary  preliminaries  to  a  fitness  for  consumption  : 
everything  beyond  these  which  adds  to  the  price  of  a  commod- 
ity before  it  reaches  the  consumer  is  a  tax  levied  upon  con- 
sumption or  production  ;  just  as  much  a  tax,  if  the  increase  is 
charged  for  transportation  and  collected  by  an  importer  over 
his  counter,  as  if  it  is  charged  for  revenue  and  received  by  a 
collector  at  the  custom-house.  If  tea,  for  instance,  is  raised 
and  cured  in  China,  and  thence  transported  thousands  of  miles 
to  London,  and  the  consumer  in  Loudon  pays  tluee  times  the 
price  at  which  it  was  sold  by  him  who  cured  it  in  China,  that 
additional  sum,  however  fairly  earned  by  the  services  rendered, 
is  nothing  more  nor  less  than  a  tax  of  two  hundred  per  cent 
on  the  consumption  of  tea  in  London,  which  again  reacts  and 
affects  the  profit  on  its  production  in  China.  It  is  a  necessary 
tax,  perhaps,  in  view  of  existing  means  of  transportation,  but 
none  the  less  is  it  a  tax.  The  process  of  removal  from  one 
point  to  another  —  from  the  point  of  production  to  that  of 
consumption  —  has  added  nothing  to  the  wealth  of  the  world. 
It  has,  indeed,  distributed,  but  it  has  in  no  way  increased  or 
intrinsically  qualified  human  possessions  ;  for  after  it,  as  before, 
whether  in  Canton  or  in  London,  the  world  possessed  the  same 
number  of  pounds  of  tea  of  a  given  quality.  So  of  floui",  of 
cotton,  and  of  every  other  product  of  the  soil.  Transportation 
is  simply  a  distribution  of  wealth  in  existence  ;  and  the  cost 
of  distribution  constitutes  a  tax  on  consumption,  levied  in- 
dift'erently  on  the  producer,  the  manufacturer,  and  the  con- 
sumer. This  tax  must  necessarily  fall  upon  all  parties,  though 
in  unequal  jm^portions  very  difficult  to  ascertain.  Could  it  be 
wholly  abolished,  and  breadstuffs  be  transported  without  cost 
to  London,  the  cxchangeal)le  value  ot  flour  would  rise  in  Chicago 
and  fall  in  Liverpool.  Society  would  then  at  once  be  relieved 
of  a  tax  fn  comparison  with  which  all  the  imposts  of  govern- 
ments arc  trivial.  In  like  manner,  anything  which  adds  to  the 
necessary  cost  of  transportation  aggravates  the  tax,  and  any- 
thing which  diminishes  it  removes  one  more  burden  from^ 
human  toil. 


THE   TRANSPORTATION   TAX.  359 

These  facts  and  principles  must  be  clearly  borne  in  mind, 
else  the  great  interest  which  communities  have  in  all  questions 
of  transportation  cannot  be  appreciated.  The  preliminary 
discussion  may  be  fairly  svimmed  up  as  follows.  All  elements 
of  price  which  add  to  the  amount  paid  by  the  consumer  of  any 
commodity  above  the  cost  of  the  production  and  mamxfacture 
are  in  the  nature  of  direct  taxes  on  consumption  and  of  indirect 
taxes  on  production,  — •  whether  imposed  by  government,  by 
distance,  or  the  friction  of  trade,  —  everywhere  and  always  a 
tax. 

The  transportation  tax,  however,  has  one  peculiarity  in  com- 
mon with  the  tariff  tax  upon  imports ;  the  lower  it  is  fixed, 
w^ithin  certain  limits,  the  larger  in  the  aggregate  it  becomes. 
Large  aggregate  receipts  of  railroad  corporations,  or  large  per 
capita  payments  to  their  railroads  by  communities  by  no  means 
necessarily  indicate  an  oppressive  scale  of  railroad  charges,  but, 
not  improbably,  the  contrary.  Industry  pays  a  large  tax  be- 
cause the  tax  is  levied  in  such  a  way  that  industry  is  stimu- 
lated, and  carries  its  burdens  easily.  With  municipal  taxes, 
except  those  raised  from  tariff  imposts,  the  case  is  wholly  dif- 
ferent. Every  increase  there  indicates  a  direct  addition  to  a 
burden,  — the  larger  its  aggregate  the  heavier  is  the  load  im- 
posed by  it  upon  the  production  of  the  State ;  in  the  case  of 
the  transportation  tax,  on  the  contrary,  the  larger  the  total 
becomes  the  greater  is  the  volume  of  business  indicated,  and, 
very  probably,  the  lower  the  tariff  rates. 

It  is  computed  that  the  yearly  revenue  of  the  53,000  miles 
of  railroad  now  in  operation  in  the  United  States  is  in  the 
neighborhood  of  $450,000,000,  and  represents  an  annual 
average  payment  of  nearly  $  12  per  head  from  the  whole  pop- 
ulation of  the  country.  The  rapid  growth  of  this  payment 
has  been  extraordinary,  and  well  illustrates  the  importance  of 
the  limitation  last  referred  to-  In  1840,  when  there  were  less 
than  3,000  miles  of  railroad  in  the  country,  the  annual  pay- 
ment hardly  exceeded  $8,000,000  or  fifty  cents  each  to  the 
inhabitants  of  the  country.  Even  in  1860  it  scarcely  equalled 
$  150,000,000  or  less  than  five  dollars  per  head.     These  sums 


360  THE   RAILROAD   SYSTEM. 

measure  the  growth  of  the  internal  commerce  of  the  country. 
Should  a  new  invention  come  into  use  which  should  prove  as 
great  an  improvement  upon  steam  locomotion  as  that  is  on 
the  system  which  preceded  it,  the  aggregate  transportation  tax 
would  not  improbably  be  increased  several  fold,  and  amount, 
perhaps,  to  fifty  dollars  a  year  for  each  inhabitant,  and  yet, 
upon  the  tonnage  now  moved,  the  yearly  expenditure  would 
be  decreased  from  $450,000,000  to  $45,000,000.  The  large 
amount  of  the  levy  aifords  in  itself  no  just  ground  for  com- 
plaint. 

The  next  question  is,  For  what  purpose  is  this  tax  levied, 
and  to  whom  does  it  accrue  1  What  portion  of  this  large  sum 
is  a  necessary  tax  upon  the  community  ;  and  what  portion,  if 
any,  is  unnecessary  1  Railroads  must  not  only  be  built,  but 
they  must  be  operated.  The  gross  income  of  the  system  must 
therefore  be  devoted  to  two  ends  :  first,  to  the  operating  of 
the  roads  ;  and,  secondly,  to  the  remuneration  of  the  capital 
invested  in  them.  The  tables  of  statistics  show,  that,  under 
the  present  system  of  opei'ating  American  railroads,  tvhich 
must  be  presumed  to  be  reasonably  economical,  seventy  per 
cent  of  the  gross  earnings  are  consumed  in  operating  expenses. 
This  is  approximately  the  absolute  cost  of  working  and  re- 
placing the  machinery  which  keeps  up  the  movement  of  com- 
merce. It  is  the  necessary  tax,  the  first  cost,  as  it  were,  of 
friction.  The  remaining  thirty  per  cent  of  the  $  450,000,000 
of  gross  revenue  —  perhaps  $  1 50,000,000  per  annum  —  is  the 
amount  reserved  as  a  remuneration  for  the  capital  and  the  risk 
involved  in  the  construction  and  management  of  the  system. 
This  sum  is,  therefore,  an  annual  tax  by  itself,  which  the  peo- 
ple of  this  country  pay  to  those  who  own  and  control  our  rail- 
roads. In  view  of  the  inestimable  value,  both  immediate  and 
prospective,  of  the  service  rendered,  and  of  the  essential  part 
it  i)lays  in  material  and  moral  progress,  it  would  indeed  be 
strange  if  this  tax  were  very  closely  scrutinized,  or  were  not 
cheerfully,  and  even  eagerly,  paid.  Yet  every  tax  upon  their 
resources  should  be  calmly  and  carefully  scanned  by  a  people 
which  pretends  to  guide  its  own  destinies.     In  spite,  however, 


THE   TRANSPORTATION   TAX.  361 

of  its  enormous  proportions  and  onerous  nature,  in  spite  of 
the  fact  that  it  adds  to  the  cost  of  every  article  of  consump- 
tion and  enters  into  the  expense  of  every  movement  of  nation- 
al and  individual  life,  this  transportation  tax  is  so  indirect  in 
its  nature,  so  plausible  and  fair  in  its  reason,  and  is  so  com- 
pletely a  part  of  the  customary  life  of  the  community,  that, 
until  within  a  very  few  years  past,  it  has  excited  absolutely 
far  less  real  attention  and  less  earnest  discussion  than  a  tax 
of  a  dollar  a 'gallon  on  whiskey,  or  two  cents  a  pound  on  cot- 
ton. Indeed,  it  has  not  as  yet  even  excited  enough  attention 
to  cause  the  several  State  governments  to  procure  returns  and 
statistics  about  it.  Its  very  amount  must  be  guessed  at  from 
such  partial  data  as  the  corporations  themselves  see  fit  to  fur- 
nish. 

Two  thirds  of  this  annual  tax  of  $450,000,000  may  then  be 
regarded  as  made  in  payment  of  actual  work  of  transportation, 
and  the  remaining  one  third  represents  what  is,  in  the  opinion 
of  the  owners  of  the  roads,  a  fair  compensation,  or  at  any  rate 
the  best  that  can  be  got,  for  the  use  of  the  capital  and  the  risk 
involved  in  the  business.  In  other  words,  certain  private  indi- 
viduals, responsible  to  no  authority  and  subject  to  no  super- 
vision, but  looking  solely  to  their  own  interests  or  to  those  of 
their  immediate  constituency,  yearly  levy  upon  the  internal 
movement  of  the  American  people  a  tax,  as  a  suitable  remu- 
neration for  the  use  of  their  private  capital,  equal  to  about  one 
half  of  the  expenses  of  the  United  States  government,  —  army, 
navy,  civil-list,  and  interest  upon  the  national  debt  included. 
Whether  this  sum  is  in  the  aggi'egate  an  excessive  remunera- 
tion or  not  is  immaterial.  Probably,  as  will  hereafter  be  seen, 
it  is  not.  This  consideration  only  partially  meets  the  real 
vital  point  at  issue.  The  question  of  the  manner  in  which  the 
amount  is  raised  is  even  more  important  than  the  amount  it- 
self For  it  may  well  be  that  a  tax,  not  in  itself  excessive, 
may  be  raised  in  an  annoying  and  vexatious  manner ;  or  so  as 
to  oppress  one  locality,  at  the  expense  of  another ;  or  it  may 
be  exacted  in  payments  which  fluctuate  wildly  at  different 
times,  destroying  all  basis  of  sound  business  calculation ;  or  it 
16 


362  THE  EAILROAD  SYSTEM. 

may  be  regulated  so  as  to  exact  the  greatest  compensation  pos- 
sible for  the  least  possible  service ;  or,  finally,  it  may  be  cal- 
culated to  produce  a  fixed  and  reasonable  profit,  and  to  dis- 
courage all  business  development  in  excess  of  that  easily  able 
to  pay  such  profit.  All  of  these  are  matters  not  of  mere 
study,  —  they  are  not  suggestions  of  that  which  is  improb- 
able, —  but  they  are  points  of  serious  public  concern.  They 
are  all  involved  in  the  question  of  the  manner  in  which  the 
transportation  tax  is  I'aised,  as  contradistinguished  from  its 
amount. 

The  obvioiis  danger  of  committing  so  extraordinary  a  power 
as  that  described  to  private  individuals,  could  not  well  have 
escaped  the  attention  of  legislators  even  in  the  earliest  days 
of  the  system.  But  when  the  process  of  railroad  construction 
began,  forty  years  ago,  those  who  were  called  upon  to  inaugu- 
rate it  little  foresaw  the  proportions  which  it  was  soon  to 
assume.  They,  however,  took  every  precaution  against  abuse 
which  suggested  itself,  and  the  world  has  since  done  little  more 
than  follow  in  the  path  marked  out,  and  elaborate  and  work 
over  the  various  measures  then  devised. 

This,  however,  took  place  the  lifetime  of  a  generation  back. 
The  practical  working  of  the  various  theories  on  which  the 
system  was  inaugurated  has  of  late  years  been  anxiously  dis- 
cussed, and  the  question  of  how  the  community  can  best  regu- 
late and  keep  within  bounds  the  cost  of  its  transportation  is 
assuming  a  new  significance.  The  time  also  has  now  come 
when  the  operation  of  the  various  laws,  whether  natural  or 
human,  —  whether  laws  of  trade  or  acts  of  legislature,  —  which 
were  relied  upon  to  secure  a  healthy  and  economical  railroad 
development  can  be  passed  in  review  and  a  judgment  be  calmly 
formed  upon  them. 

Sir  Robert  Peel  and  King  Leopold  of  Belgium  were  probably 
the  two  men  of  those  days  whose  minds  exercised  the  most 
immediate  and  lasting  influence  upon  this  question.  They 
both  approached  it,  however,  in  the  manner  characteristic  of 
their  education,  habits  of  thought,  and  the  political  and  social 
surroundings  in  which  they  were  placed.     Peel  was  essentially 


THE    TRANSPORTATION   TAX.  363 

a  parliamciitai-iau ;  King  Leopold  was  the  model  head  of  a 
bureaucratic  government.  The  former  instinctively  turned 
for  protection,  to  the  operation  of  natural  laws,  such  as  com- 
petitiou  or  the  laws  of  supply  and  demand,  supplemented,  if 
need  be,  by  any  desired  amount  of  acts  of  Parliament ;  the 
Litter  took  counsel  with  the  economists  and  administrators, 
ivnd  shaped  a  policy  under  which  the  community  was  intended 
to  cut  itself  loose  from  the  capitalist,  and  to  undertake  the 
management  cf  its  own  channels  of  communication  in  its  own 
interests.  The  systems  inaugurated  respectively  in  England 
and  Belgium  under  the  impulse  of  these  two  minds  have  since 
fjpread  over  the  whole  civilized  world.  The  several  nations 
havG  modified  them  in  greater  or  less  degree  to  meet  local 
conditions  or  habits  of  thought  or  action;  but,  in  great  es- 
sentials, the  two  groups  all  the  world  over  clearly  exhibit 
their  distinctive  characteristics. 

The  English  system,  which  is  that  also  in  use  in  America, 
rests  wholly  upon  the  fundamental  principle  of  the  private 
ownership  of  railroads  by  corporations.  By  these  corporations 
the  roads  are  to  be  constructed,  and  they  recoup  themselves 
for  the  risk  and  expenditure  involved  by  levying  a  toll  for 
the  transportation  of  merchandise  or  passengers.  Two  agen- 
cies were  relied  upon  to  prevent  the  owners  of  the  railroads  from 
abusing  the  power  confided  in  them  ;  the  one  was  competition, 
the  other  was  statute  regulation.  It  was  argued,  and  still  is 
argued,  that  if  railroads  were  left  wholly  alone,  if  all  parties 
were  free  to  construct  them  wherever  a  demand  for  them  was 
thought  to  exist,  if  these  parties  were  free  to  make  what  they 
could  on  them,  that,  in  this  case,  wherever  the  profits  of  the 
capital  employed  were  excessive  new  capital  would  flow  in  and 
new  roads  would  be  constructed  until  here,  as  in  all  other  de- 
piulments  of  trade,  profits  and  charges  would  equalize  them- 
selves. This  was  Peel's  early  argument ;  it  did  not  last  long 
with  him. 

It  was  many  years,  however,  after  the  railroad  system  was 
inaugurated,  before  any,  except  the  most  clear-sighted,  could 
be  made  to  realize  that  railroads  were  monopolies,  and  must  be 


364  THE   RAILROAD   SYSTEM. 

treated  as  such,  not  only  in  their  own  interest,  but  in  that  of 
the  community.  King  Leopold,  saw  it  as  earlj'  as  1834. 
George  Stephenson  saw  it  from  the  beginning,  and  condensed 
the  whole  question  into  the  pithy  apophthegm,  that  "  where 
combination  was  possible,  competition  was  impossible."  Again 
in  1846,  before  a  committee  of  the  House  of  Commons,  he  gave 
it  as  his  decided  opinion  that  the  power  of  government  su- 
pervision should  extend  to  vetoing  the  construction  of  com- 
peting lines,  to  protect  the  public  against  the  heavj'  rates  of 
traffic  which  would  be  required  to  remunerate  the  capital  in- 
volved in  their  construction.  Stephenson  fully  appreciated 
what  the  ultimate  burden  of  free  trade  in  railway  construc- 
tion would  amount  to.  He  saw  that  a  line  once  built  must 
impose  a  tax  on  the  community,  if  only  to  keep  itself  in 
existence.  He  also  saw,  that,  if  a  competing  road  was  built 
to  divide  any  given  business  which  could  by  any  possibility 
be  done  over  a  road  already  constructed,  in  the  end  that 
business  must  support  two  roads  instead  of  one.  A  very 
slender  knowledge  of  human  nature  would  have  enabled  him 
to  take  the  next  step,  and  conclude  that  any  number  of 
competing  roads  would  ultimately  unite  to  exact  money 
from  the  community,  rather  than  continue  a  ruinous  com- 
petition. As  combination  must  always  remain  possible,  no 
matter  how  many  roads  are  constructed,  it  necessarily  fol- 
lows that  the  more  roads  the  heavier  tax,  provided  always 
a  loss  number  properly  managed  could  have  been  made  to 
do  the  work.  Relief  did  not  lie  in  that  direction  ;  it  could  be 
found  there  only  under  circumstances  which  rendered  exclusive 
combination  impossible.  Nor  is  human  legislation  to  be  in- 
cluded in  the  number  of  such  circumstances.  Had  Stephenson 
lived  a  few  years  longer,  he  would  have  seen  in  England  an 
excellent  example  of  the  virtues  of  railroad  competition  guar- 
anteed by  law,  as  a  safeguard  to  the  community,  —  an  example 
not  without  a  savor  of  comfort  for  America,  with  the  memory 
of  recent  legislative  experiences  fresh  in  mind.  The  Great 
Northern  Railway  went  before  Parliament  for  its  chartei*.  The 
lines  tiireatened  with  competition  combined   their  influence. 


THE    TRANSPORTATION   TAX.  365 

and  the  bill  was  thrown  out.  The  next  year  the  application 
was  renewed,  and  those  having  the  bill  in  charge  engineered 
it  successfully  through  Parliament  by  offering  to  accede  to  a 
charter  limitation  of  first-class  fares  to  a  point  thirty  per  cent 
below  those  charged  by  the  existing  companies.  The  bill  was 
passed  and  the  line  constructed,  so  that  a  combination,  except 
at  low  fares,  seemed  prohibited  by  act  of  Parliament.  Before 
the  new  road  was  opened,  however,  before  a  passenger  had 
passed  over  it,  its  directors,  pointing  out  to  the  other  compa- 
nies how  much  they  would  suffer  from  such  ruinous  competi- 
tion, induced  them  to  combine  the  Parliamentary  strength  of 
all  concerned,  and  they  actually  got  through  Parliament  an 
amendatory  bill,  raising  the  fares  of  the  new  road  to  the  level 
of  the  old.  The  law  of  self-preservation  had  simply  been  re- 
pealed by  act  of  Parliament. 

How  much  this  fallacy  of  cheap  transportation  through  rail- 
I'oad  competition  has  cost  Great  Britain  cannot  well  be  esti- 
mated. During  the  mania  of  1845-46,  it  was  estimated  by 
Mr.  Laing,  of  the  Board  of  Trade,  and  the  estimate  was  con- 
firmed by  Robert  Stephenson,  that  out  of  three  hundred  mil- 
lions sterling,  at  that  time  expended,  seventy  millions  had  been 
completely  thrown  away  in  constructing  unnecessary  duplicate 
lines  with  a  view  to  competition. 

The  result  of  this  dependence  upon  a  correct  general  prin- 
ciple, misapplied,  has,  in  America,  been  both  singular  and 
interesting ;  and,  indeed,  it  is  a  question  whether  competition 
has  done  more  harm  or  good  to  the  business  community  which 
has  relied  upon  it  as  a  protection  in  this  case  against  monop- 
oly. No  system  can  work  its  way  out  to  logical  results  which 
is  perpetually  subject  to  fluctuations  ;  and  competition  has 
ever  acted  on  the  railway  system  as  a  violent  disturbing  ele- 
ment. At  one  time  it  has  forced  down  the  charges  on  trans- 
portation to  an  unnaturally  low  rate,  only  to  elevate  them  at 
another  time  by  artificial  combinations  to  a  rate  as  unnecessa- 
rily excessive.  During  the  year  18G9  freights  between  New 
York  and  Chicago  fluctuated  under  this  influence,  between 
$5  and  $.37.60  per  ton  ;  and  between  the  same  point  and  St. 


366  THE   RAILROAD    SYSTEM. 

Louis,  between  $7  and  $46  ;  while,  the  Erie  Railway  carried 
goods  to  Chicago  at  as  low  a  rate  as  $2  per  ton,  and  from 
this  bounded  back  to  $  37.  In  the  last  case,  part  of  the  trans- 
portation was  by  water ;  but  rates  on  the  same  class  of  freights 
caiTied  through  by  rail  have  ranged  all  the  way  from  four  mills 
to  four  cents  per  ton  per  mile,  and  fluctuated  violently  from 
the  one  point  to  the  other.  Such  has  been  the  result  of  com- 
petition as  regards  through  business,  while  upon  local  business 
its  effect  has  been  even  more  pernicious.  *'  Usually,  competing 
lines,  while  they  seek  the  same  large  centres  of  commerce,  reach 
them  through  different  districts.  This  confines  their  competi- 
tion to  the  trade  of  such  centres,  while  the  traffic  of  the  coun- 
try peculiar  to  each  line  is  not  only  uucompeted  for,  but  sub- 
jected to  an  extra  and  often  oppressive  tax,  whereby  to  restore 
the  revenue  depletions  each  road  suffers  in  its  violent  struggles 
with  the  others  for  jointly  accessible  business.  The  ability  to 
unjustly  burden  uncompetitive  or  local  trade  supplies  trans- 
porters with  strength  to  wage  prolonged  contests  for  other 
tonnage  at  less  than  cost  of  transport ;  and  this  wretched 
warfare,  indirectly  ruinous  to  the  local  business  it  overtaxes, 
is  of  little  real  benefit  to  the  property  battled  for ;  as,  sooner 
or  later,  truce  is  declared,  and,  if  the  truce  becomes  a  perma- 
nent peace,  competition  ceases ;  while  if  but  a  temporary 
measure,  it  is  presently  broken,  but  only  to  be  renewed ;  then 
renewed,  bnt  only  to  be  broken  ;  while  the  tax  on  trade  fluc- 
tuates with  the  shattering  or  maintenance  of  covenants,  until 
commerce  is  harassed  and  dazed  and  partially  prostrated  by 
its  wild,  illogical,  and  ruinous  changes."  * 

Vor  these  reasons  competition  has  long  been  regarded  among 
t!ie  best  authorities  on  railroads  as  a  dangerous  evil.  The 
moat  sagacious  look  upon  it  as  a  terrible  weapon  in  the  hands 
of  the  visionary,  the  reckless,  or  the  ignorant  ;  an  almost  in- 
superable obstacle  in  the  way  of  the  judicious,  the  conserva- 
tive,   and    the    progressive.      It   disturbs   every   calculation, 

•  "  Transportation  ns  a  Science."  A  jxiper  read  by  Jos.  D.  I'otts,  Presi- 
dent of  the  Empire  Transportation  Co.,  before  tlie  American  Social  Science 
AsForintion  nt  n  m<>pting  in  Xew  York,  October  2fi,  1869. 


THE   TRAXSrORTATION   TAX.  367 

vititates  every  result,  puts  a  stop  to  all  experiment,  destroys 
all  system.  All  persons  concerned  in  the  management  of  rail- 
ways are  therefore  anxious  to  get  rid  of  it,  —  the  more  respect- 
able, that  the  railway  system  may  have  a  chance  to  work  out 
its  results  under  a  settled  policy ;  the  unscrupulous  and  less 
reputable,  that  a  better  occasion  for  levying  plunder  may  be 
aiforded.  Under  these  circumstances  it  is  not  impossible  that 
all  may  unite  in  the  adoption  of  the  principle  now  lying  at  the 
basis  of  what  are  known  as  the  "  colored  lines,"  —  that  of  a 
combination  and  a  clearing-house  for  the  adjustment  of  diffi- 
culties, —  as  a  solution  of  the  question. 

Such  a  combination  would,  of  course,  at  once  put  a  stop  to 
competition  in  so  far  as  the  land  carriage  of  freight  is  con- 
cenied.  And  for  this  reason  in  many  of  the  States  legislation 
has  been  directed  against  the  consolidation  of  competing  lines. 
In  1869  an  act  forbidding  it  was  passed  in  New  York,  and 
more  recently  a  provision  to  the  same  end  has  been  incorpora- 
ted into  the  Constitutions  of  Illinois  and  of  Michigan.  It  is 
wholly  unnecessary  to  say  that  all  such  measures  of  State 
legislation  are  utterly  futile,  almost  childish.  These  giants 
have  sometime  since  outgrown  State  swaddling-clothes.  Even 
had  they  not,  the  character  of  such  legislation  is  most  open  to 
criticism.  Certainty  and  responsibility  in  management  are 
two  of  the  most  important  requisites  of  a  good  railroad 
system.  This  is  peculiarly  the  case  in  America,  where  almost 
our  only  machinery  for  the  coiTection  of  abuses  lies  in  the 
degree  of  concentration  with  which  public  opinion  can  be 
brought  to  bear  in  a  given  direction.  If  our  people  distinctly 
feel  an  evil  and  can  be  made  to  see  that  some  one  is  responsible 
for  it,  there  is  no  interest  nor  combination  of  interests  which 
can  long  resist  the  pressure.  So  far  as  railroads  are  concerned, 
competition  puts  both  certainty  and  responsibility  out  of  the 
question ;  it  renders  the  first  impossible,  and,  by  dividing, 
destroys  the  last.  Most  conclusive  illustrations  of  all  these 
propositions,  as  well  as  of  the  utter  insufficiency  of  State  leg- 
islation to  deal  with  the  subject,  may  be  found  in  the  expert' 
ence  of  the  year  1870. 


368  THE   RAIF.ROAD   SYSTEM. 

During  that  year  competition  was  bitter  in  the  extreme ; 
the  rates  made  East  and  West  were  simply  ruinous.  On 
certain  descriptions  of  freight  they  literally  were  reduced  to 
nothing,  and  cattle  were  carried  over  the  Erie  road  at  a  cent 
a  head,  as  against  one  dollar  a  car,  the  rate  charged  on  the 
Central.  On  other  articles  the  reduction  was  not  so  great, 
but,  both  on  passengers  and  goods,  rates  were  purely  nominal, 
and  hardly  averaged  a  third  of  the  usual  amounts.  Of  course 
this  could  not  last.  Early  in  September,  1870,  representatives 
of  the  competing  lines  met  in  New^  York,  and  proceeded  to 
put  a  stop  to  competition  in  the  one  way  possible  among  mo- 
nopolists, —  by  combination.  The  parties  in  interest  were  the 
Central,  the  Erie,  and  the  Pennsylvania  Railroads.  The  com- 
petition was  mainly  from  Illinois  to  New  York.  In  both 
Illinois  and  New  York  laws  forbidding  the  consolidation  of 
competing  lines  were  in  force,  and  all  the  roads  were  carrying 
on  operations  in  one  or  both  of  those  States.  At  the  meeting 
in  question  it  was  decided  to  "pool"  the  eaniings  of  the 
colored  lines  to  all  competing  points  ;  in  other  words,  all  re- 
ceipts from  that  business  which  was  supposed  to  receive  a 
peculiar  benefit  from  competition,  were  to  be  paid  into  a  common 
fimd,  competition  was  immediately  to  cease,  fixed  rates  were 
to  be  charged,  and  thus,  at  last,  all  the  great  trunk  lines  were 
to  be  practically  consolidated,  in  so  far  as  the  business  com- 
munity was  concerned.  This  arrangement  was  agreed  to,  but 
broke  down  for  the  moment  because  of  quairels  among  cer- 
tain of  the  individual  contracting  potentates.  The  in'econcil- 
ables  were  Messrs.  Gould  and  Vanderbilt,  two  New  York  men, 
who  represented  two  New  York  roads ;  and  yet  tlie  New  York 
statute-book  contained  a  recently  enacted  law  intended  to 
prevent  and  render  impracticable  any  combination  like  the  one 
agreed  upon.  Not  being  able  to  effect  the  desired  aiTange- 
mcnt  there,  certain  of  the  same  parties  went  to  Chicago,  in  a 
Stttte  where  a  similar  provision  to  that  in  force  in  New  York 
had  l)een  made  a  part  of  the  Constitution,  and  there  they  ac- 
tually did  enter  into  an  agreement,  under  which  all  the 
roads  between  Chicago  and  Omaha  "  pooled "  their  receipts 


THE   TRANSPORTATION   TAX.  P)G9 

between  those  points,  and  tliis  contract  went  into  effect.  Yet 
no  law,  no  constitutional  restriction,  was  violated.  No  law,  in 
fact,  could  be  framed  which  would  meet  the  case,  and  the 
solemn  efforts  to  accomplish  it  were  simply  illustrative  of  the 
extreme  ignorance  prevailing  among  fairly  intelligent  men  as 
to  the  practical  limits  of  legislation. 

The  failure  of  the  New  York  negotiators  was,  however,  only 
temporary  ;  and,  moreover,  it  is  by  no  means  clear  that  its 
failure  was  not  a  disaster  to  the  community.  In  this  combi- 
nation would  at  least  have  been  found  some  degree  of  certainty 
and  of  i-cspousibility.  Rates  would  no  longer  have  varied  with 
every  season  and  to  every  city  ;  points  destitute  of  competi- 
tion would  not  have  been  plundered,  as  they  now  habitually 
are,  that  competing  points  might  be  supplied  for  nothing. 
During  the  summer  of  1870,  accordingly,  many  towns  in  New 
England  were  charged  upon  Western  freights  heavily  in  ad- 
vance of  the  sums  charged  for  carrying  the  same  freights  on 
the  same  roads  a  hundred  or  two  miles  farther  on.  All  be- 
cause, through  con)  petition,  the  farther  point  was  sei'ved  at  a 
loss  to  the  carrier,  and,  therefore,  the  nearer  had  to  pay  the 
road  profits  for  both,  besides  replacing  the  loss.  The  agents 
of  the  roads  do  not  seek  to  deny  this ;  they  acknowledge  and 
defend  it.  They  say,  and  say  truly  :  "  We  must  live.  If  our 
through  business  is  done  at  a  loss  (and  they  show  that  it  was 
done  for  nothing),  then  our  local  business  must  pay  for  all." 
This  was  the  case  in  New  England.  The  cities  of  central  New 
York  fared  no  better.  During  a  war  of  rates,  almost  any 
manufactured  article  will  be  carried  from  the  seaboard  to  the 
West  for  perhaps  one  half  of  the  amount  charged  for  carry- 
ing the  article  there  from  a  semi-mterior  point.  So  also  as 
regards  Eastern  freights.  Syracuse,  Rochester,  and  the  like 
class  of  cities  can  neither  compete  on  equal  terms  with  Boston 
m  the  markets  of  the  West,  nor  with  Chicago  in  those  of  the 
East  The  discrimination  against  them  is  said  to  amount  in 
certain  cases  to  ten  per  cent  of  the  whole  value  of  the  article 
transported.  Neither,  under  the  competing  system,  is  there 
any  remedy  for  this  evil,  and  a  consciousness  of  this  fact,  of 
16*  X 


370  THE    RAILROAD    SYSTEM. 

the  risk  to  which  they  are  continually  exposed,  has  caused  the 
breaking  up  of  many  mraiufacturing  establishments  at  interior 
points. 

Again,  the  element  of  gambling  is  not  considered  as  an  ad- 
vantageous one  in  the  transaction  of  business.  To  eliminate 
it,  to  equalize,  to  insure  stability  and  an  even  operation  of 
natural  laws  in  trade,  is  one  attribute  of  an  advancing  civiliza- 
tion and  a  chief  result  of  science.  Does  not  a  sudden  change 
in  a  tariff,  —  a  change  sprung  on  the  community  in  an  hour, 
ranging  all  the  way  from  one  hundred  to  fifteen  thousand  por 
cent  on  all  classes  of  freights,  —  infuse  an  element  of  chance 
into  current  transactions  ?  Just  this  fluctuation  took  place  in 
September,  1870.  How,  also,  could  the  biisiuess  community 
deal  with  certainty,  or  make  orders  or  contracts  during  that 
year,  when  it  at  one  time  cost  far  more  to  send  goods  from 
Boston  to  Chicago  than  from  New  York,  and  shortly  after 
New  York  firms  had  to  ship  their  goods  to  Boston  as  the 
cheapest  way  of  getting  them  to  the  West.  Thus  competition 
by  rail,  unlike  that  by  sea,  knew  no  law  of  supply  and  de- 
mand ;  there  was  always  a  given  supply  of  machinery,  wholly 
irrespective  of  the  demands  of  trade.  Here,  then,  was  no 
certainty,  no  stability  ;  a  great  evil  existed ;  yet  who  was  to 
be  held  responsible  for  it  1  Upon  what  point  was  public  opin- 
ion to  be  concentrated  1  It  could  not  be  on  the  system,  for 
nothing  of  the  sort  in  an  organized  form  exists ;  neither  could 
it  be  oil  individuals,  for  they  clearly  were  unable  to  control 
events,  otherwise  there  would  have  been  no  recourse  to  "  pool 
ing."  The  responsibility,  in  fact,  was  and  is  absolutely  divided 
away  ;  it  does  not  exist. 

States  and  legislatures  will  doubtless  for  some  little  whib 
longer  cling  to  the  idea  of  competition  as  regulating  tariffs  by 
rail,  but  it  must  break  down  in  the  end.  The  value  of  com- 
petition as  aflecting  the  i-ailroad  system  is  very  great,  but  it 
lies  in  the  superior  qualify  of  the  service  it  exacts,  —  the 
promptness,  comfort,  civility,  and  general  regard  to  the  wishes 
of  tlic  public.  These  things  no  statute  can  regulate,  but 
competition  does ;  as  regards  rates  on  the  other  hand   the 


THE   TRANSPORTATION   TAX.  371 

result  of  thirty  years'  reliance  upon  competition  may  je  V>riefly 
summed  up  by  saying  that  nineteen  places  out  of  every  twenty 
on  our  railroads  are  wholly  at  the  mercy  of  close  monopolies, 
while  each  twentieth  point  enjoys  such  advantages  of  the  law 
of  supply  and  demand  as  may  be  evolved  out  of  fierce  com- 
petition, alternating  with  close  combination. 

The  school  of  Sir  Robert  Peel  had,  however,  by  no  means 
exclusively  relied  upon  the  operation  of  natural  laws  to  regu- 
late the  new  system.  They  would  not  have  been  English 
statesmen  had  they  not  had  recourse  to  acts  of  Parliament  to 
make  good  any  deficiencies  in  the  law  of  supply  and  demand ; 
and  following,  as  is  the  custom  in  such  cases,  the  precedents 
already  upon  the  statute-book,  they  undertook,  in  the  com- 
plete breakdown  of  competition,  to  apply  the  remedy  against 
extortion  which  most  natui-ally  suggested  itself,  that  of  affixing 
a  limit  to  profits. 

This  was  accordingly  done,  and,  following  the  example  thus 
set,  in  the  earliest  charters  granted  in  this  country  are  found 
clauses  resei*ving  a  power  of  abating  charges  for  transportation 
whenever  the  dividends  of  the  companies  shall  exceed  a  certain 
percentage  on  the  capital.  In  England,  Parliament  further 
attempted  to  limit  the  profits  of  these  enteq:)rises  by  including 
in  the  charters  long  and  carefidly  prepared  lists  of  charges 
which  the  companies  could  not  exceed.  Such  an  attempt, 
made  at  that  time,  could  of  course  only  be  very  crude  and 
luisatisfactory.  The  system,  however,  expanded  through  long 
years  into  a  mass  of  legislation,  half  public,  half  private,  based 
on  no  principle  and  no  knowledge,  and  finally  culminating, 
after  the  manner  of  the  English,  in  a  multiplicity  of  conflicting 
acts,  and  a  confusion  worse  confounded.  For  instance,  by  the 
charter  of  the  Lancaster  &  Carlisle  Railway,  passed  in  1844-, 
and  resembling,  at  great  length,  the  old  toll-boards  of  the 
turnpikes,  it  was  minutely  set  forth  that  a  "horse,  mule,  or 
ass"  should  not  be  charged  at  more  than  three  pence  per 
mile,  nor  a  calf  or  pig,  "  or  other  small  animal,"  at  more  than 
a  penny ;  and  so  on  through  an  interminable  list,  beginning 
with  "  dung,  compost,  and  all  sorts  of  manure,"  and  ending 


372  THE    RAILROAD    SYSTEM. 

with  "passengers  and  animals."  Tlie  cliarter  of  this  road,  by 
the  way,  consisted  of  three  hundred  and  eighty-one  distinct 
clauses  ;  and  the  commission  of  1867  reports,  that,  in  ad- 
dition to  the  acts  of  universal  application,  "the  powers  of 
the  railway  companies  and  the  consequent  rights  of  the  public 
are  now  scattered  through  three  thousand  one  hundred  acts  of 
Parliament,"  and  are  exceedingly  difficult  of  ascertainment. 

It  further  resulted  that  the  tariffs  of  charges,  being  based 
upon  the  old  turnpike  and  canal  experiences,  were  extremely 
exorbitant,  and  the  profits  of  the  early  lines  were  imdiily  large. 
In  other  words,  the  tax  levied  on  the  community  by  the  pro- 
prietors of  the  lines  in  their  own  favor  was  evidently  oppres- 
sive. The  attention  of  Parliament  was  called  to  the  subject, 
and  in  1844,  at  the  instance  of  Mr.  Gladstone,  a  law  was  en- 
acted which  contained  a  clause  of  genei'al  operation,  practi- 
cally, in  the  view  of  railway  directors,  limitiug  their  dividends 
to  ten  per  cent  per  annum  upon  the  stock  of  their  roads. 
This  particiilar  feature  of  an  otherwise  well-considered  act  led 
to  results  in  no  way  anticipated.  Not  only  did  it  go  far  to- 
w^ards  bringing  on  the  railroad  mania  of  1845,  which  was 
comparatively  a  small  matter,  but  it  introduced  into  England 
the  practice  of  what  has  since  been  known  as  stock-water- 
ing, —  one  of  the  most  ingenious  and  oppressive  forms  of 
burdening  the  growth  and  industry  of  a  people  and  of  mort- 
gaging future  development  which  has  ever  been  devised. 
Immediately  \ipon  the  enactment  of  this  law  the  railway  man- 
agers resorted  to  the  usual  weapons  of  those  who  wish  to  tax 
an  unwilling  commimity.  The  more  direct  and  lighter  tax 
having  raised  a  popular  outcry,  they  acquiesced  in  what  they 
regarded  as  its  repeal,  and  at  once  proceeded  to  levy  several 
times  the  sum  previously  levied,  through  a  vastly  more  op- 
pressive form  of  indirect  taxation.  As  they  considered  that 
after  the  enactment  of  1844  they  could  no  longer,  on  their 
existing  stock,  safely  divide  all  the  money  they  could  earn,  the 
railroad  financiers,  on  every  possible  pretext,  create  additional 
shares,  until  the  gross  amount  of  the  stock  should  be  sufficient 
to  absorb,  in  the  dividends  allowed  by  the  act,  the  utmost  poa- 


THE   TRAKSPORTATIOX   TAX.  /u.i 

sible  net  earnings  of  their  roads.  The  Gladstone  act,  in  so  far 
as  it  failed  to  place  checks  upon  the  creation  of  new  stock, 
was  defective.  Excessive  charges  and  large  profits  had  been 
found  to  be  like  excessive  direct  taxation,  —  a  present  burden, 
which  wrought  its  own  cure,  and  that  speedily ;  but  an  increase 
of  stock  was  nothing  more  nor  less  than  a  creation  of  new 
national  debt.  It  represented  so  much  paper  capital  to  pay 
dividends  and  interest  upon  which  a  tax  in  the  shape  of  trans- 
portation charges  was  to  be  levied  forever.  In  other  words, 
the  increasing  business  of  the  community  was  mortgaged  in 
perpetuity  to  pay  dividends  on  capital  stock  of  railways  upon 
which  not  a  penny  had  ever  been  paid  in. 

It  is  not  worth  while,  however,  to  go  into  the  details  of  the 
history  of  stock- watering  in  England.  There  it  has  never  been 
reduced  to  a  science,  althoiigh  Sir  Morton  Peto  carried  it  to  a 
very  creditable  degree  of  perfection.  In  America  only  is  the 
process  found  in  its  highest  stage  of  development.  Here  it 
may  be  studied  as  an  art  now  in  its  mature  perfection,  and  as 
such  merits  consideration  by  itself. 

Neither  would  it  be  difficult  in  American  railway  history  to 
select  examples  of  another  no  less  unsatisfactory  result  of  this 
usury  law.  Roads  could  be  named  which  have  found  them- 
selves inconveniently  prosperous ;  so  far  from  having  any 
incentive  to  increased  energy  they  already,  on  the  business 
they  conveniently  did,  earned  more  than  it  was  quite  safe  for 
them  to  confess  to.  Their  profits  seemed  to  invite  legislative 
interference.  As  a  result,  development  stopped.  Every  pro- 
posal of  new  enterprise  was  quietly  but  honestly  met  with 
the  argument  that  it  was  better  to  "  leave  well  enough  alone." 
And  for  this  result  the  corporations  should  not  be  held  respon- 
sible. They  had  fulfilled  their  contract,  only,  by  the  terms 
of  that  contract,  the  community,  at  a  certain  point  in  their 
development,  not  only  deprived  them  of  every  incentive  to 
growth,  but  made  gi'owth  absolutely  dangerous  to  them. 
Neither  men  nor  corporations  will  labor,  of  their  own  free  will, 
that  others  may  enjoy  all  the  fruits  of  their  labor  ;  and,  while  . 
the  sic  vos  non  vobis  principle  is  rigorously  applied  to  railroad 


874  THE   RAILROAD    SYSTEM. 

enterprises,  who  cau  blame  them  if  they  practically  rejily  to 
all  remonstrances  and  appeals  with  an  indolent  cui  bono  ?  Cor- 
porations, like  men,  will  labor  unceasingly,  and  incessantly 
develop  under  the  impetus  either  of  necessity  or  gain  ;  but  to 
suppose,  when  absence  of  all  competition  deprives  them  of  the 
first  impulse,  and  force  of  law  destroys  the  second,  that  an  ab- 
stract love  of  the  general  prosperity  will  induce  corporations, 
any  more  than  men,  to  do  double  or  fourfold  the  labor  necessarily 
required  to  earn  a  given  profit,  requires  an  absence  of  common 
sense  not  infrequently  characteristic  of  the  statute-book. 

In  spite  of  the  ill  success  which  attended  all  the  eai-lier  ef- 
forts in  that  direction,  the  idea  of  regulating  railroad  charges 
by  act  of  legislature  has  continued  to  be  a  very  favorite  one  in 
the  Anglo-Saxon  mind.  A  deep-seated  faith  in  "the  omnipo- 
tence of  Parliament "  is  inherent  in  the  English  speaking  race. 
No  act  has,  however,  yet  been  framed  which  meets  the  case 
proposed,  and  it  is  not  easy  to  see  how  one  could  be  framed. 
The  difficulty  is  very  apparent.  The  railroad  system  of  every 
large  community  is  made  up  of  many  different  members. 
These  members  exist  and  perform  their  duties  to  the  com- 
munity under  all  sorts  of  varying  conditions.  One  road  is 
built  for  passenger  travel  and  another  for  freight,  or  even  for 
the  transportation  of  a  particular  kind  of  freight,  such  as 
iron  or  coal.  There  are  roads  to  accommodate  local  travel 
and  others  to  accommodate  through  travel.  Construction, 
and  consequently  the  cost  of  operation,  vary  just  as  much  as 
the  configuration  of  the  soil.  We  thus  have  a  complicated 
system,  between  the  numerous  members  of  which  no  con- 
nection necessarily  exists.  The  legislature  is  called  upon  to 
frame  a  law,  or  a  series  of  laws,  which  shall  regulate  the  tariff 
of  charges  thi'oughout  this  system. 

There  are  but  two  kinds  of  statute  which  any  legislative 
body  can  pass  ; — there  are  statutes  of  general  operation  and 
those  of  special  operation.  A  law  establishing  a  scale  of  fares 
and  freights  of  universal  operation,  which  would  affect  one 
road  very  slightly,  would  incvitaV)ly  ruin  another  ;  and  a  law 
which  would  meet  the  requirements  of  one  half  of  the  com- 


THE    TRAXSPOUTATIOX    TAX  37<) 

mnnity  would  almost  inevitably  ignore  those  of  the  other. 
A  simple  general  law  being  thus  out  of  the  question,  the  only 
other  resource  has  hitherto  been  to  acts  of  special  legislation. 
Tliese  of  course  can  be  put  in  operation  to  any  extent,  as  has 
already  been  done  in  England,  and  probably  with  pi'ecisely 
similar  results.  No  large  and  constantly  shifting  legislative 
body  can,  in  the  nature  of  things,  be  qualified  to  speciiically 
regulate  the  tariffs  of  numerous  railroads. 

Instinctively  appreciating  the  great  difficulties  inherent  in 
this  matter,  and  yet  feeling  a  strong  desire  to  do  something 
in  the  premises,  many  legislatures  in  America  have  taken  re- 
fuge in  a  sort  of  rude  rule  of  thumb.  They  have  sought  to 
fix  upon  all,  or  certain  of  the  roads  subject  to  their  jurisdic- 
tion, a  hard  indiscriminate  tariff  on  travel  or  freight  of  so  much 
per  mile.  Such  a  solution  of  the  difficulty  may  be  popular, 
but  it  is  not  intelligent.  It  ignores  all  special  requirements ; 
all  considerations  of  speed,  comfort,  distance,  quantity  or  fre- 
quency of  movement.  The  operation  of  a  simple  clause 
inserted  in  its  charter,  limiting  the  rates  for  travel  upon  the 
New  York  Central  Railroad,  is  always  pointed  out  as  conclu- 
sive evidence  of  the  wisdom  of  this  class  of  legislation.  The 
Central  is  one  railroad  out  of  many  in  the  State,  however,  and 
two  obvious  criticisms  may  be  made  upon  the  operation  of  the 
law  even  in  this  case.  It  wholly  fails  to  provide  for  the  univer- 
sally recognized  principle  that  the  burden  of  taxation  should 
be  adjusted  so  as  least  to  be  felt.  He  who  travels  daily  is  no 
more  considered  than  he  who  travels  once  a  year.  No  provis- 
ion whatever  is  made  for  that  discoimt  in  price  which  should 
always  be  allowed  to  the  heavy  purchaser.  The  most  serious  ar- 
gument that  can  however  be  adduced  against  this  precedent  is 
that  it  discourages  and  defeats  more  searching  but  more  compli- 
cated efforts  at  reform,  (confining  itself  to  fares,  it  does  not 
even  pretend  to  touch  the  intricate  subject  of  freights.  In 
1851  the  freight  business  and  the  passenger  business  were  of 
neai'ly  equal  value  to  the  railroad  system,  returning  for  that 
year  about  $  20,000,000  each ;  but  during  the  year  1868 
the  ratio  of  freight  earnings  to  passenger  earnings  was  as 


?,7C)  Till'.    RAILROAD   SYSTEM. 

$280,000,000  to  $120,000,000,  or  as  nearly  two  and  a  half 
to  one.  The  law  in  question,  therefore,  ignores  that  which 
bears  the  great  burden  of  the  transportation  tax.  And  yet 
this  is  the  best  result  of  thirty  years  of  consecutive  effort 
towards  controlling  the  method  of  levying  this  tax  by  means 
of  legislative  action ;  —  a  short,  simple  rule,  ignoring  every 
principle  of  railroad  economy  and  two  thirds  of  its  business, 
but  limiting  the  charge  for  travel  over  a  specified  road  to  two 
cents  per  mile. 

Enough  has  perhaps  been  said  of  the  practical  working  of 
competition,  siipplemented  by  statute  regulation,  as  a  means 
of  controlling  the  mode  of  raising  the  transportation  tax.  It 
is  unnecessary  to  I'ecapitulate.  It  is  sufficient,  in  leaving  this 
branch  of  the  subject,  to  say  that,  waiving  all  question  of  rea- 
sonableness of  amount,  the  levying  of  the  $  450,000,000  a  year 
which  constitutes  this  tax  would  seem  to  be  marked  by  many 
of  those  characteristics  which  are  considered  most  objection- 
able in  a  government  tax.  The  amount  fluctuates  wildly  and 
is  very  unequally  imposed ;  the  laws  which  seek  to  limit  its 
amount  lead  to  fraud,  evasion,  and  abuse,  besides  occasionally 
even  to  the  wilful  sacrifice  of  those  interests  which  they  were 
intended  to  protect. 

It  only  remains  in  this  connection  to  briefly  describe  the 
results  arrived  at  by  the  other  method  of  controlling,  in  behalf 
of  the  community,  this  subject  of  the  transportation  tax,  —  the 
method  of  ownership  by  the  state  as  inaugurated  by  King 
Leopold  and  Stephenson.  This  also  has  practically  developed 
into  results  which  its  originators  could  hardly  have  foreseen. 
The  magnitude  of  the  task  involved  in  supplying  with  rail- 
roads a  coinitry  even  so  densely  populated  and  of  so  limited 
extent  as  Belgium  was  evidently  more  than  the  government 
had  anticipated.  Accordingly  at  a  very  early  period  it  was 
forced  to  devolve  a  large  portion  of  the  work  upon  private 
enterprise.  The  result  was  a  mixed  system  of  ownership. 
The  goveniment  lines,  managed  by  a  bureau  at  the  head  of 
which  was  a  cabinet  minister,  run  side  by  side  with  private 
lines  owned  and  operated  by  companies  as  in  England  and 


THE    TRAXSPORTATION   TAX.  377 

America.  These  were  gradually  consolidated  until,  in  1864,  of 
the  1247  miles  of  railroad  in  the  country  some  460  were  either 
absolutely  owned  or  controlled  under  lease  by  the  government, 
and  the  remaining  780  miles,  or  little  short  of  two  thirds  of 
the  whole,  were  in  the  hands  of  two  private  companies.  The 
result  of  this  division  of  ownership  was  something  wholly  un- 
anticipated. It  led  to  a  new  form  of  railroad  competition, 
which  gave  the  government  without  recourse  to  legislation 
a  complete  practical  control  over  the  railroad  system  as  a 
whole.  The  essential  principle  of  this  control  was  found,  not 
as  in  England  and  America  in  a  multiplication  of  roads  built 
to  compete  but  more  frequently  combining  in  private  hands, 
but  in  a  regular  and  healthy  competition  through  the  mixed 
ownership  of  roads  already  existing.  Or,  stated  in  another 
way,  the  power' of  combination  was  destroyed  by  the  introduc- 
tion into  the  system  of  an  element  which  would  not  combine. 
In  1866  the  practical  effect  of  this  novel  form  of  competition 
was  stated  by  the  Belgian  Minister  at  the  head  of  the  bureau 
in  these  words,  "  the  state  railways  thus  find  themselves 
placed  in  constant  comparison  with  the  railways  worked  by 
private  companies  ;  on  the  one  hand  stimulating  them  to  gen- 
eral improvements,  and  on  the  other  hand  acting  as  a  sort  of 
check  against  any  attempt  to  realize  extravagant  profits  at  the 
cost  of  the  public." 

A  sufficient  illustration  both  of  the  method  of  practical 
procedure  and  of  the  results  arrived  at  under  this  system  is 
furnished  by  the  record  of  the  doings  of  the  ten  years  between 
1856-65. 

In  1856,  in  spite  of  a  considerable  increase  in  the  miles  of 
railroads  worked,  the  freight  movement  of  the  Belgian  roads 
was  found  to  have  seriously  decreased.  Instead  of  making 
good  the  deficiency  in  receipts  by  increased  rates  on  existing 
business,  after  the  manner  of  private  companies,  the  admin- 
istration met  the  emergency  by  accepting  all  traffic  that 
offered  at  greatly  reduced  special  rates.  This  policy  succeeded 
so  well  that  in  1861  the  principle  was  adopted  as  regards  miner- 
als and  raw  materials  of  a  regular  low  scale  of  charges,  with  a 


378  THE   KAILROAU    SYSTEM. 

reduction  according  to  distance.  This  resulted  in  the  follow- 
ing year  in  an  increase  of  72  per  cent  in  the  tonnage  of  this 
class  of  goods.  In  1862  the  principle  was  extended  to  goods 
of  the  next  class  with  similar  results.  In  1864,  freights  were 
reclassified  and  the  new  principle  applied  to  all  except  the  first 
class,  or  small  parcels,  which  in  this  country  are  known  as  ex- 
press matter.  The  result  was  summed  up  by  the  Minister  of 
Public  Works  as  follows  :  "  In  eight  years,  between  1856  - 
64,  the  charges  on  goods  have  been  lowered,  on  an  average, 
by  28  per  cent;  the  public  have  sent  2,706,000  tons  more 
goods,  while  they  have  actually  saved  more  than  $4,000,000 
on  the  cost  of  carriage,  and  the  public  treasury  has  earned  an 
increased  net  profit  of  $1,150,000,"  A  further  reduction, 
made  subsequently  to  this  statement,  in  1864,  exceeded  even 
these  results,  and  under  it  the  tonnage  rose  from  4,479,000 
tons  in  1863,  to  6,533,000  in  1864. 

In  1865,  the  goverament,  encouraged  by  these  results, 
turned  its  attention  to  fai'es,  now  applying  to  them  principles 
before  applied  to  freights.  A  general  scale  was  adopted,  in 
which  the  charge  per  mile  was  diminished  in  proportion  to  the 
length  of  the  journey  over  22  miles.  For  distances  less  than 
22  miles  the  old  rates  were  retained,  varying  between  1.2  and 
2.5  cents  per  mile,  according  to  the  class  of  carnage.  Above 
the  22  miles  the  rates  rapidly  decreased  until  the  fares  for  dis- 
tances over  155  miles  were  as  low  as  one  cent  per  mile  for  first 
class,  and  seven  mills  per  mile  for  second  class  tickets.  Under 
this  system  the  faro  from  Boston  to  Albany,  for  instance, 
would  be  respectively  $2,  $1.40,  and  $1,  according  as  it  was 
paid  for  a  first,  second,  or  third  class  ticket,  instead  of  $  6,  as 
nt  present.  The  eftect  of  this  change  was  a  singular  and  very 
striking  illustration  of  the  immediate  influence  of  any  reduc- 
tion of  rates  on  the  volume  of  travel.  The  traffic  within  dis- 
tances of  22  miles,  on  which  no  reduction  was  made,  scarcely 
increased  at  all.  Between  22  and  46  miles,  on  which  dis- 
tances the  reduction  was  small,  it  increased  only  20  per  cent, 
while  on  distances  over  46  miles,  on  which  a  heavy  reduction 
was  made,  it  nearly  doubled. 


THK    TilANSl'OKTAllON    TAX  Oi'J 

Here  at  last  we  see  experiments  carried  on  steadily  to  a  le- 
gitimate result  by  which  principles  are  evolved.  A  free,  un- 
trammelled competition  between  agents  not  limited  in  number 
would  be  equally  eft'ective,  but  no  such  results  have  yet  been 
arrived  at  through  the  spasms  of  railroad  competition.  -The 
grand  result,  therefore,  so  far  as  Belgium  is  concerned,  has 
been  all  that  could  be  desired.  While  the  state  roads  have 
boldly  led  the  way,  as  in  the  case  cited,  in  all  the  reforms 
which  have  made  the  Belgium  system  famous,  they  have  yet 
accomplished  these  great  results  without  injury  to  the  private 
roads.  These  have  followed  the  lead  of  the  state  roads  only 
as  that  lead  was  seen  by  its  results  to  be  safe,  and  they  have 
proved  in  consequence  far  more  profitable  investments  to  their 
owners  than  the  roads  in  England.  As  a  result  of  this  happy 
deviation  from  the  strict  plan  of  state  ownership  originally 
formed  by  King  Leopold,  the  Belgian  people  are  better  satis- 
tied  than  any  other  with  the  present  condition  of  their  rail- 
road system.  There  is  no  popular  disposition  to  dispose  of 
the  State  roads  to  private  parties,  and,  while  the  service  of 
the  roads  in  private  hands  is  not  manifestly  inferior  to  that  of 
the  public  roads,  there  is  no  danger  that  the  mixed  system  of 
ownership  which  is  the  essence  of  the  system  will  be  broken 
up  by  a  popular  clamor  for  a  universal  assumption  of  its  rail- 
roads by  the  State. 

The  curious  result  is  thus  finally  arrived  at  that  the  two 
typical  railroad  systems  have  worked  round  and  almost  com- 
pletely changed  front.  The  English  system,  organized  in  a 
complete  reliance  on  competition,  is  tending  both  in  England 
and  America  more  and  more  strongly  towards  regulation  by 
act  of  Parliament ;  while  the  Belgian,  founded  on  the  com- 
plete negation  of  the  power  of  competition  under  the  circum- 
stances, has  practically  found  competition,  through  a  system 
of  mixed  ownership,  its  effective  weapon  of  control.  Though 
to  a  degree  in  this  way  approaching  each  other,  the  two  sys- 
tems are  still  widely  divergent,  but  it  can  hardly  admit  of  any 
question  that,  up  to  the  present  time,  the  railway  system  in 
use  in  Belgium  has  furnished  the  community  with  a  far  more 


380  THK  RAILROAD  SYSTEM. 

efficient  and  reliable  method  of  controlling  and  regulating  the 
levying  of  the  transportation  tax  than  has  been  furnished  by 
the  system  in  use  in  England  or  America. 


CHAPTER   III. 

RAILROAD     CONSOLIDATION. 

CONSOLIDATION  and  stock-watering  are  two  such  promi- 
nent features  in  the  development  of  the  railroad  system, 
and  have  attracted  so  much  discussion,  that  they  merit  a  sepa- 
rate consideration.  Consolidation  is  one  form  of  that  tendency 
to  combination  which  Stephenson  referred  to  in  his  aphorism. 
Combination  in  some  shape,  —  a  iinion  of  forces  under  the  in- 
fluence of  an  outside  pressure,  —  is  one  of  the  certain  results  of 
any  active  competition  ;  it  is,  in  fact,  a  measure  dictated  by  the 
instinct  of  self-preservation.  The  simple  question  always  is 
whether  the  field  in  which  the  combination  takes  place  is  of  a 
kind  which  will  admit  of  the  union  of  all  the  agencies  at  work 
in  it.  If  it  is,  a  close  monopoly  is  almost  sure  to  ensue.  The 
laws  of  competition  thus  have  play  just  in  proportion  as  these 
agencies  are  too  numerous  for  a  perfectly  united  action.  The 
possession  of,  or  at  least  some  small  share  in  a  monopoly  is 
always  very  eagerly  craved  by  the  average  man,  while,  on  the 
other  hand,  the  progress  of  civilization,  by  multiplying  agencies, 
is  continually  increasing  the  difficulty  of  etFecting  a  perfect 
combination  of  any  kind.  Yet  the  difficulty  which  surrounds 
the  creation  of  a  monopoly,  and  the  resource  and  ingenuity 
with  which  the  creation  of  monopolies  Is  pursued,  seem  to 
move  along  with  almost  equal  steps.  The  modem  develop- 
ment of  the  area  of  competing  industries,  for  instance,  would 
seem  to  have  rendered  any  combination  of  labor  in  general,  to 
affect  its  share  in  the  profits  of  i)roduction,  a  practical  impos- 
sibility ;  but,  on  the  contrary,  the  facility  of  intercourse  be- 
tween all  civilized   countries  seems   to  have  developed  the 


RAILROAD   CONSOLIDATION.  381 

possibility  of  combination  to  an  even  greater  extent.  The 
consequence  is  that  single  associations  claim'  that,  from  some 
central  office,  they  will  at  no  remote  day  be  able  to  control 
the  productions  of  skilled  industry  in  conflict  with  capital 
from  the  Baltic  to  the  Gulf  of  Mexico.  So  it  is  with  trans- 
portation. The  construction  of  as  many  channels  of  inter- 
course as  mankind  saw  fit  to  build  would  seem  to  have  made 
any  monopoly  of  intercourse  the  dream  of  a  visionary.  Man- 
kind has,  however,  at  least  proved  equal  to  the  effort.  The 
operation  of  the  natural  law  has  not  in  this  respect  been 
allowed  to  pass  unchallenged. 

The  control  of  the  intercourse  between  the  interior  basin  of 
the  continent,  drained  by  the  St.  Lawrence  and  the  Mississippi 
with  their  affluents,  and  the  sea-board  has  naturally  been  the 
great  prize  contended  for  among  the  railroads  of  America. 
Formerly  it  seemed  as  though  the  Erie  Canal  and  the  Mis- 
sissippi River  had  insured  a  divided  monopoly  of  this  to  the 
cities  of  New  York  and  New  Orleans.  Then  the  railroads 
broke  in  upon  the  dispositions  of  nature,  and,  for  a  time,  the 
monopoly  was  effectually  destroyed.  Mankind,  however,  very 
shortly  rallied  its  energies,  and  the  old  struggle  was  renewed. 
Science  had  now,  in  a  great  degree,  superseded  nature,  and 
the  several  artificial  channels  of  intercourse  and  the  men  con- 
trolling them  were  brought  into  sharp  conflict.  Each  interest 
became  anxious  to  strengthen  itself,  and  to  secure  every  ad- 
vantage over  all  others  ;  and  thus,  by  degrees,  there  resulted 
a  race  of  consolidation,  luitil  a  very  few  little  groups  of 
men  practically  controlled  the  whole  railroad  system  of  the 
country. 

There  are  four  great  thoroughfares  connecting  the  several 
Atlantic  seaports  with  the  interior  of  the  continent,  —  the 
New  York  Central,  the  Erie,  the  Pennsylvania,  and  the  Balti- 
more and  Ohio  railroads.  A  sketch  of  the  development  and 
present  position  of  two  of  these  will  afford  a  sufficiently  vivid 
illustration  of  one  phase,  and  unquestionably  the  most  strikiog 
one  in  the  progress  of  consolidation. 

Eighteen  years  ago  the  New  York  Central  Road,  which  forms 


382  THE   RAILROAD   SYSTEM. 

the  nucleus  of  the  Vanderbilt  combination,  was  not  in  existence 
as  a  corporation.  In  1853  it  was  chartered,  and  eleven  dis- 
tinct corporations  were  merged  into  it.  Five  of  these  corpo- 
rations, the  longest  of  which  could  boast  but  of  76  miles 
of  track,  divided  among  them  the  300  miles  which  separate 
Albany  from  Buffalo.  The  corporation  created  out  of  these 
elements  was  again,  in  its  turn,  merged  in  1869  into  the 
larger  New  York  Central  cfe  Hudson  River  Railroad  Company, 
whicli  controls  witiiin  the  State  of  New  York  but  little  less 
than  a  thousand  miles  of  track,  and  is  represented  by  rather 
more  than  $100,000,000  of  capital.  The  consolidation,  so 
far,  was  perfect  and  had  taken  place  under  a  State  law  and 
within  State  limits.  Growi:h,  however,  did  not  stop  here ;  the 
combinations  of  capital  simply  adapted  themselves  to  the  forms 
of  a  political  system.  Beyond  the  limits  of  New  York,  the 
corporation  held,  in  the  eye  of  the  law,  no  property ;  it  did 
not  control  a  mile  of  track.  At  Buffalo,  however,  the  Central 
connected  with  another  company,  itself  made  up  of  four  sepa- 
rate primal  links  which  had  once  connected  Buffalo  with  Chi- 
cago, and  which  had  united  in  obedience  to  the  same  law  of 
development  which  had  built  up  the  Central.  West  of  Chi- 
cago came  yet  other  links  in  the  trans-continental  chain.  Three 
lines  competed  to  fill  the  gap  which  lay  betvveen  Chicago  and 
the  eastern  terminus  of  the  Pacific  Road,  —  the  Northwest- 
ern, the  Rock  Ishmd,  and  the  Burlington  &  Missouri.  In  the 
autumn  of  1869  the  consolidation  of  the  Central  and  the  Hud- 
son River  took  place.  Immediately  afterwards,  at  the  annual 
election  of  the  Lake  Shore  &  Michigan  Southern,  the  Vander- 
bilt interest  took  open  possession  of  that  corporation,  control- 
ling a  majority  of  its  stock.  In  May,  1870,  it  in  like  manner  as- 
sumed control  of  the  Rock  Island  and  Chicago  tt  Northwestern. 
The  same  parties  in  interest  were  now  practically  the  owners 
of  a  connected  line  of  road  from  New  York  to  Omaha ;  there 
was  no  consolidation  as  yet,  but,  so  far  as  the  public  and  com- 
peting roads  were  concerned,  the  close  of  1870  found  the  six 
parties,  which  but  a  short  time  before  had  been  in  possession 
of  the  traus-coutinental  thoroughfare,  reduced  to  three.    With- 


RAILROAD   CONSOLIDATION.  383 

out  taking  into  consideration  the  immense  influence  which 
their  position  necessarily  gave  to  them  over  other  and  less 
powerful  members  of  the  railroad  system,  here  was  a  single 
combination  of  capital  representing  the  control  of  at  least  4,500 
miles  of  road  and  not  less  than  $250,000,000  of  capital. 

This,  however,  is  but  the  result  of  a  loose  alliance  between 
men  notorious  for  their  feuds  and  their  selfishness;  the  combina- 
tion is  temporary,  depending  perhaps  upon  the  continued  life  of 
one  who  lacks  little  of  being  an  octogenarian.  The  men  who 
control  it  not  infrequently  evince  talents  of  a  very  high  order, 
and  their  course  is  made  continually  interesting  by  episodes  of 
dramatic  surprise.  '  They  lack,  however,  the  greatest  and  most 
indispensable  element  of  permanent  success,  —  some  underly- 
ing, indissoluble  bond  of  union.  In  this  respect  they  differ 
entirely  from  the  great  combination  which  has  gradually  taken 
shape  in  the  neighboring  State  of  Pennsylvania.  What  is 
commonly  known  as  the  Pennsylvania  Central  Railroad  Com- 
pany is  probably  to-day  the  most  powerful  corporation  in  the 
world,  as,  indeed,  it  owns  and  operates  one  of  the  oldest  of 
railroads.  Its  organization,  as  compared  with  that  of  its 
great  rival,  the  New  York  Central,  bears  the  relation  of  a 
republic  to  an  empire.  Csesarism  is  the  principle  of  the 
Vanderbilt  group  ;  the  corporation  is  the  essence  of  the  Penn- 
sylvania system.  The  marked  degree  in  which  the  character 
of  the  people  have  given  an  insensible  direction  to  the  man- 
agement of  their  corporations  in  these  two  States  is  well  de- 
serving of  notice.  In  New  York  politics  the  individual  leader 
has  ever  been  the  centre  ;  in  Pennsylvania,  always  the  party. 
The  people  of  this  last  State  are  not  marked  by  intelligence ; 
they  are,  in  fact,  dull,  uninteresting,  very  slow  and  very  per- 
severing. These  are  qualities,  however,  which  they  hold  in 
common  with  the  ancient  Romans,  and  they  possess,  also, 
in  a  marked  degree,  one  other  characteristic  of  that  classic 
race,  the  power  of  organization,  and  through  it  of  command. 
They  have  always  decided  our  Presidential  elections;  they 
have  always,  in  their  dull,  heavy  fashion,  regulated  our  eco- 
nomical  policy.      Not  open   to   argument,    not  receptive   of 


384  THE  RAILROAD  SYSTEM. 

ideas,  not  given  to  flashes  of  brilliant  execution,  this  State 
none  the  less  knows  well  what  it  wants,  and  knows  equally 
well  how  to  organize  to  secure  it.  Its  great  railroad  affords  a 
striking  illustration  in  point.  It  is  probably  the  most  thor- 
oughly organized  corporation,  that  in  which  each  individual  is 
most  entirely  absorbed  in  the  corporate  whole,  now  in  ex- 
istence. With  its  president  and  its  four  vice-presidents,  each 
of  whom  devotes  his  whole  soul  to  his  peculiar  province, 
whether  it  be  to  fight  a  rival  line,  to  develop  an  inchoate 
trafiic,  to  manipulate  the  legislature,  or  to  operate  the  road, 
—  with  this  perfect  machinery  and  subordination  there  is  no 
reason  why  the  corporation  should  not  assume  absolute  con- 
trol of  all  the  railroads  of  Pennsylvania. 

Such  is  this  great  corporation,  high  in  credit  in  the  money- 
markets  of  the  world,  careful  withal  of  its  outward  repute, 
apparently  unbounded  in  its.  resources.  Organized  so  long 
ago  as  1831,  it  had  thirty  miles  of  road  ready  for  operation 
in  the  succeeding  year.  Not  imtil  1854,  however,  was  the 
Pennsylvania  Railroad  proper  completed.  It  then  controlled 
the  line  from  HaiTisburg  to  Pittsburg,  210  miles,  which 
had  cost  a  little  less  than  $17,000,000,  and  was  repre- 
sented by  about  $12,000,000  of  stock  and  $7,000,000  of 
indebtedness.  This  might  be  considered  the  starting-point ; 
$  3,500,000  of  annual  gross  earnings  on  a  capital  a  little  less 
than  $  20,000,000.  For  many  years  its  growth  was  confined 
to  Pennsylvania,  Jn  1869,  however,  its  policy  in  this  respect 
underwent  a  change,  and  it  burst  through  State  limits,  extend- 
ing its  field  of  operations  over  the  vast  region  lying  between 
the  great  lakes  and  the  Ohio  upon  the  north  and  south,  and 
the  Missouri  on  the  west.  This  sudden  development  was,  as 
usual,  the  immediate  re<iult  of  competition,  and  was  almost 
forced  upon  the  corporation  in  spite  of  itself,  as  a  measure  of 
defence.  The  secret  history  of  the  railway  intrigues  and  legis- 
lative manipulations  of  1809  would  make  a  very  singular  nar- 
rative could  the  whole  of  it  be  disclosed.  That  year  was,  in 
fact,  a  turning-point  in  our  railway  ))rogresH.  The  Erie  manage- 
ment had  then  fallen  into  confessed  discredit,  and  was  beginning 


RAILROAD   CONSOLIDATION.  385 

its  remarkable  attempt  under  Messrs.  Gould  and  Fisk  to  cany 
on  a  great  commercial  enterprise  in  absolute  disregard  of  every 
principle  of  good  faith,  commonly  supposed  to  be  at  the  basis 
of  civilized  transactions.  Those  managing  this  thoroughfare 
were  desperately  thrusting  out  in  every  direction,  contracting, 
buying,  and  leasing  all  adjoining  roads  with  a  rashness  only 
surpassed  by  their  easy  disregard  of  the  obligations  thus  con- 
tracted. Early  in  1869  they  sought  to  cut  off  the  connections  of 
the  Pennsylvania  road  and  to  shut  it  up  within  the  limits  of  that 
State.  For  a  brief  time  the  battle  seemed  to  go  in  their  favor, 
but  suddenly  the  tide  turned.  The  result  showed  that  they 
were  no  match  for  the  powerful  antagonist  they  had  provoked  ; 
—  their  overthrow  was  so  effectual  as  to  have  in  it  some  ele- 
ments of  the  ludicrous.  Bills  in  the  interest  of  the  Pennsylvania 
company,  which  it  was  doubtful  if  it  were  in  the  power  of  any 
legislature  to  pass,  were  pushed  through  their  various  stages, 
and  received  executive  approval,  with  a  speed  unprecedented  ; 
contracts,  arranged  with  the  Erie  manageirs  by  boards  of  direc- 
tors, were  unexpectedly  rejected  in  meetings  of  stockholders ; 
and  for  a  time  this  irresistible  power  even  threatened  to  wrest 
from  the  Erie  road  its  own  peculiar  and  long-established  con- 
nections. The  result  of  these  operations  was  that  the  Penn- 
sylvania Central  soon  controlled  by  perpetual  lease  a  whole 
system  of  roads  radiating  to  all  points  in  the  AVest  and  South- 
west. By  one  it  reached  Chicago,  by  another  St.  Louis,  and 
by  a  third  Cincinnati.  At  Indianapolis  it  had  absorbed  a  net- 
work of  routes ;  at  Chicago  and  St.  Louis  it  had  formed  close 
connections  looking  directly  towards  the  Pacific.  Here  for  a 
time  it  rested,  declaring  that  its  policy  did  not  look  to  any 
expansion  beyond  the  Mississippi.  The  corporation  rested, 
perhaps,  but  not  the  ambitious  men  who  controlled  it ;  their 
individual  operations  now  commenced.  They  obtained  the 
control  of  roads  endowed  with  vast  land  grants  in  Michigan 
and  in  Minnesota ;  they  were  the  directors  of  the  Northern 
Pacific ;  and  when  the  men  who  had  constructed  the  Union 
Pacific  broke  down  under  the  multiplicity  of  their  engage- 
ments, the  first  vice-president  of  the  Pennsylvania  road  ap- 


386  THE   RAILROAD   SYSTEII. 

peared  as  the  new  president  of  that  road  also.  The  very  land 
grants  belonging  to  the  companies  these  men  now  controlled 
amounted  to  80,000  square  miles,  or  an  area  equivalent  to 
the  aggregate  possessions  of  four  of  the  existing  kingdoms  of 
Europe. 

Meanwhile  the  Pennsylvania  Railroad  Company,  distinct 
from  its  individual  directors,  now  owned  or  held  by  lease 
400  miles  of  road  in  Pennsylvania,  and  directly  controlled 
450  miles  more,  almost  entirely  within  the  same  State; 
beyond  its  limits  it  leased  and  operated  nearly  two  thousand 
miles  in  addition,  holding  the  stock  and  bonds  of  railroads, 
canals,  towns,  and  cities,  like  some  vast  Credit  Mohilier ;  it 
had,  indeed,  no  less  than  $20,000,000  standing  on  its  books 
as  represented  by  these  investments.  In  the  sixteen  years  its 
own  capital  and  indebtedness  had  swollen  from  $  20,000,000 
to  $65,000,000,  with  a  liberty  secured  to  increase  them  to 
nearly  $100,000,000  ;  at  the  same  time  the  system  of  roads 
which  it  held  in  its  hands  returned  a  yearly  income  of  hardly 
less  than  $40,000,000,  of  which  about  $10,000,000  was 
claimed  as  net  profit. 

If,  however,  as  its  direction  had  ofl&cially  declared,  the  cor- 
poration had  no  distinct  interests  to  push  west  of  the  Missis- 
sippi, the  same  could  not  be  said  of  the  region  east  of  the 
Susquehanna.  In  the  closing  days  of  1870  New  York  was 
suddenly  sttirtled  by  the  announcement  that  the  Pennsylvania 
Railroad  had  effected  a  perpetual  lease  of  the  whole  famous 
railroad  monopoly  known  as  the  United  Companies  of  New 
Jersey.  The  rumor  proved  true,  and  some  450  miles  of  addi- 
tional track,  besides  05  miles  of  canals  and  some  30  steamers, 
in  all  some  $.35,000,000  of  property  was  by  this  transaction 
added  to  the  vast  consolidation,  and  brought  it  to  the  shores 
of  New  York  Harbor. 

It  is  unnecessary  to  consider  how  much  further  this  com- 
bination will  carry  its  operations,  or  in  what  they  will  re- 
sult. The  Pennsylvania  road  now  controls  directly  and  as 
itself  owner  or  proprietor,  and  wholly  distinct  from  its  direc- 
tors, more  than  3,000  miles  of  track,  claiming  to  represent 


RAILROAD   CONSOLIDATION.  .^87 

$175,000,000  of  securities,  and  returning  a  gros^  income  of  at 
least  $40,000,000  per  annum.  It  is  far  from  impossible  that 
this  combination  may  from  its  very  magnitude  lead  to  its  own 
downfall.  Tlie  leasing  of  roads  has  not  generally  proved  a 
source  of  profit,  and  there  are  indications  that  the  Pennsyl- 
vania Railroad  Company  w^ill  not  find  its  own  case  an  excep- 
tion to  this  rule.  Upon  the  leases  of  four  roads,  which  netted 
a  gross  income  of  over  $  15,000,000  in  1870,  the  returns 
seemed  to  indicate  a  profit  to  the  leasing  corporation  of  only 
$128,000;  while,  estimated  upon  the  returns  of  the  year 
previous  to  that  in  which  the  lease  was  made,  the  New  Jersej' 
contract  would  seem  to  involve  a  heavy  annual  payment  in 
excess  of  net  receipts.  For  years  a  general  crash  in  the 
American  railroad  system  has  been  very  commonly  predicted. 
Those  are  not  wanting  w^ho  now  confidently  insist  that  the 
shadow  of  the  United  States  Bank  rests  heavily  upon  the  Penn- 
sylvania Railway,  and  that  the  closing  pages  in  the  histories 
of  the  two  institutions  will  not  be  dissimilar.  Should  this  ap- 
prehension prove  true,  the  crash,  when  it  comes,  will  probably 
be  coincident  with  the  fall  of  the  Pennsylvania  consolidation. 

Meanwhile,  whatever  the  future  may  bring  forth,  it  is  im- 
possible to  repress  a  feeling  of  admiration,  mixed  with  vague 
alarm,  at  the  steady  massive  growth  of  this  corporation.  Its 
method  of  procedure  is  so  silent,  so  organized,  and  so  sure,  that 
it  has  already  cast  a  spell  over  the  mind  and  conscience  of  the 
State  which  created  it.  Compared  with  the  magnitude  and 
order  of  its  proceedings,  the  results  achieved  by  the  other  com- 
binations seem  but  the  freaks  of  stock-jobbers.  The  Pennsyl- 
vanians  are  reducing  consolidation  to  a  science  and  masterinc: 
the  whole  subject  of  transportation,  while  their  various  rivals 
are  dabbling  in  railroads  and  amassing  individual  fortunes. 
As  between  the  two  combinations  the  growth  of  which  has 
here  been  sketched,  it  w^ould  seem  not  unsafe  to  predict  that 
the  solidity  of  the  latter  company  is  almost  certain  ultimately 
to  overcome  the  elan  of  the  former. 

Only  one  phase  of  consolidation  is  as  yet  presented  in  the 
gi'eat  east  and  west  thoroughfares,  —  the  consolidation  brought 


388  THE   L'AILROAD    SYSTEM. 

about  through  the  stress  of  competition.  No  consoUdation  of 
the  competing  thoroughfares  has  hitherto  been  effected,  though 
several  times  it  has  been  attempted.  Instances  of  this  on  a 
smaller  scale  are,  however,  by  no  means  wanting,  and  perhaps 
no  combination  in  the  whole  history  of  the  railroad  system, 
has  ever  been  more  suggestive  than  that  effected  in  the  winter 
of  1870-71  among  the  anthracite  coal-roads  of  Pennsyl- 
vania ;  it  illustrated  in  almost  every  possible  way  both  the 
fallacies  of  railroad  competition  and  the  inefficiency  of  the 
attempts  hitherto  made  to  secure  the  railroad  monopoly  from 
abuse  througli  legislation. 

The  production  of  anthracite  coal  had  increased,  under  the 
influence  of  an  artificial  stimulus,  from  one  million  tons  in 
1842,  up  to  nearly  seventeen  millions  in  1870.  The  country 
did  not  really  require  such  a  production,  and  the  usual  severe 
struggle  ensued  as  supply  and  demand  sought  the  same  level. 
There  were  four  parties  in  the  field,  —  the  consumers,  the 
miners,  the  coal  companies,  and  the  railroads.  The  consumers 
alone  could  not  combine ;  all  others  could  and  did.  The 
miners  combined  for  an  increase  of  wages,  and  refused  to  pro- 
duce ;  the  coal  companies  combined  against  excessive  freights, 
and  refused  to  forwai'd  ;  the  railroad  corporations  combined  to 
raise  freights,  and  refused  to  carry.  The  inevitable  results 
ensued  ;  coal  in  the  same  market  fluctuated  many  hundred  per 
cent ;  the  miners  starved,  the  coal  companies  failed,  and  the 
railroads  became  unprofitable.  There  was  but  one  way  out 
of  the  difficulty,  —  a  closer  combination  between  two  of  the 
contending  parties  to  secure  a  mastery  over  the  third.  The 
coal  companies  and  the  railroads  accordingly  combined,  and 
the  railroads  became  the  largest  owners  of  mines. 

The  contest  was  now  a  simple  one  between  labor  and  capi- 
tal. Between  1867  and  1870  the  struggles  and  consequent 
fluctuations  were  incessant ;  there  was  a  constant  recurrence 
of  strikes,  resumptions  under  agreement,  violations  of  agi'ce- 
ment,  and  suspensions  of  production.  The  parties  then 
resorted  to  amicable  arrangements,  by  which  strikes  were  pre- 
^nded,  and  surplus  coal  was  sold  off  to  consumers  at  panic 


RAILROAD   CONSOLIDATION.  380 

prices  under  the  fear  of  an  impending  scarcity.  This,  how- 
ever, was  a  trick  which  would  not  bear  frequent  repetition, 
and  when,  at  last,  in  1870  it  became  evident  that  production 
was  again  in  excess  of  consumption,  and  that  a  glut  was  im- 
pending, the  two  parties  drew  together  their  forces  for  a 
decisive  conflict.  The  miners  struck  for  what  they  considered 
a  remunerative  basis  for  their  labor,  and  the  companies  com- 
bined to  starve  them  out.  They  not  only  ceased  to  produce 
from  their  own  mines,  but  they  trebled  their  freights,  and  thxis 
put  a  stop  to  production  by  all  others.  The  result  was  not 
only  great  inconvenience  and  suffering  throughout  the  country, 
but  a  violent  disturbance  of  industry,  and,  in  Pennsylvania, 
there  resulted  almost  a  condition  of  civil  war. 

So  far  the  efficacy  of  railroad  competition  alone  was  illus- 
trated, —  but  in  Pennsylvania,  as  elsewhere,  legislation  had 
sought  to  make  good  all  possible  deficieucies  in  the  work- 
ing of  natural  laws.  Recourse  was  had  to  the  statute- 
book,  and  the  charters  of  the  corporations  were  eagerly 
examined.  The  corporations,  it  will  be  remembered,  not 
only  insisted  upon  stopping  all  production  from  their  own 
mines,  but  they  also,  through  prohibitory  tariffs,  put  a 
practical  stop  to  production  from  all  other  mines.  As  trans- 
porters of  a  commodity  they  once  for  all  undertook  to  regulate 
both  demand  and  supply  as  regarded  that  commodity.  A  long 
conflict  before  the  legislature  ensued,  and  the  efifect  of  the  law 
was  discussed.  It  was  found  that,  in  the  charters  of  the 
roads,  the  amounts  which  could  be  charged  as  "  tolls "  were 
alone  limited.  The  courts  had  held  long  before,  and  when  tho 
question  had  come  up  in  a  different  connection,  that  "  tolls  " 
were  a  mere  charge  on  the  passage  of  a  person  or  article  over 
a  road  or  through  a  canal,  where  no  sers^ice  in  aid  of  such 
passage  beyond  furnishing  the  thoroughfare  were  included; 
where  the  party  owning  the  thoroughfare  likewise  furnished 
the  means  of  transportation  a  further  sum  as  freight  could  bo 
charged,  no  limit  to  which  had  been  assigned  by  law.  In 
other  words  the  law  provided  only  for  the  use  of  the  road,  and 
not  for  services  as  a  common  carrier. 


390  THE   RAILROAD   SYSTEM. 

The  railroad  combination  was  thus  left  master  of  the  field, 
and  it  only  remained  for  the  courts,  after  slow  process,  to  re- 
affirm or  reverse  their  former  decision.  For  the  time  being 
the  combined  companies  had  carried  the  day.  It  would  be 
futile,  however,  to  suppose  that  this  is  the  end  of  the  difficulty 
in  Pennsylvania.  At  the  present  time  the  question  as  to  the 
intent  of  the  law  is  again  before  the  courts.  The  carrying  it 
there  was  a  very  dangerous  move  on  the  part  of  the  railroad 
companies,  for  whatever  the  result  may  be  it  may  safely  be 
predicted  that  they  have  pushed  their  reserved  rights  too  far. 
The  difficulty  lies  beyond  the  reach  of  any  court  of  law  ;  it  will 
be  found  to  be  nothing  less  than  the  breaking  down  of  the 
guarantees  hitherto  relied  upon  to  protect  the  community 
against  the  abuse  of  great  powers  by  private  monopolies.  It 
required  just  such  a  combination  of  circumstances  as  exists  iu 
Pennsylvania  to  raise  this  question.  Elsewhere  it  has  only 
threatened ;  here  it  must  now  be  confronted. 

The  examples  of  combination  hitherto  discussed  have  been 
those  of  a  more  elementary  nature,  —  those  which  would  natu- 
rally be  looked  for  in  the  earlier  and  less  complex  days  of  a 
system.  It  is  extremely  unlikely,  however,  that  this  process 
will  stop  with  the  permanent  consolidation  of  certain  connect- 
ing lines,  as  in  the  case  of  the  Pennsylvania  Central,  or  in  the 
temporary  combination  of  certain  competing  lines,  as  in  tlie 
case  of  the  anthracite  coal  railroads.  Indications  are  not 
wanting  that  the  forms  of  concentration  hitherto  described 
are  but  one,  and  not  the  most  significant,  phase  of  the  work- 
ing of  general  law.  It  is  the  one  which  most  effectively  and 
dramatically  presents  itself  to  the  public,  but  it  is  not  im- 
probable that  a  more  important  revolution  is  now  in  ra[)i(l 
progress.  Properly  to  understand  the  origin  and  possible 
scope  of  this  movement,  a  retrospect  is  necessary. 

What  is  known  as  the  express  system  of  America  is  a  very 
peculiar  and  convenient,  though  expensive,  organization,  wholly 
the  creation  of  this  country  and  of  the  present  generation.  The 
men  who  have  since  given  their  names  to  immense  companies, 
wielding  millions  of  capital,  began  their  brilliant  careers  in  a 


KAILROAD   CONSOLIDATION.  391 

very  modest  way.  To  the  Harndens  belongs  the  credit  of 
originating  the  business.  They  began  operations  in  1839, 
passing  to  and  fro  between  Boston  and  New  York,  carpet-bag 
in  hand ;  but  that  carpet-bag  was  big  with  the  express  system 
of  America.  At  first  they  imdertook  little  more  than  to  carry 
money,  letters,  and  valuables,  to  make  collections,  and  to  see 
to  the  delivery  of  very  small  parcels  between  the  two  cities ; 
but  the  carpet-bag  soon  expanded  into  a  trunk;  the  tnmk 
developed  into  a  crate,  and  each  new  crate  contained  more 
and  more  cubic  feet  imtil  at  last  they  became  freight-cars, 
and  the  managers  grasped  at  the  internal  carrying  trade.  For 
several  years  the  receipts  of  the  route  between  Boston  and 
New  York  hardly  exceeded  fifty  dollars  a  day,  out  of  which 
fares,  salaries,  office-rent,  wages,  and  costs  of  delivery  had  to 
be  paid.  The  machinery,  however,  was  needed ;  new  lines 
were  organized,  opposition  started  up,  and,  when  Harnden 
died  in  1845,  only  thirty -three  j'ears  old,  the  business  was 
practically  as  fully  developed  as  it  is  to-day.  In  1868  there 
were  over  3,000  licensed  express  carriers  and  agents  in  the 
country,  paying  an  Internal  Revenue  tax  on  more  than 
$22,000,000  of  gross  receipts.  Even  as  early  as  1845  the 
organization  had  brought  about  a  division  of  the  carriage  of 
freight.  The  most  valuable  and  remunerative  part  of  it,  the 
carrying  of  all  small  and  valuable  packages,  which  demand 
little  I'oom  and  pay  heavy  rates,  had  passed  out  of  the  hands 
of  the  railroads  into  those  of  the  express  companies.  At 
one  time  the  system  seemed  likely  to  monopolize,  by  means 
of  its  despatch  lines,  the  whole  business  of  "time  freights," 
and  to  draw  to  itself  the  carriage  of  all  articles,  no  matter  how 
bulky,  on  which  persons  were  willing  to  pay  the  price  neces- 
sary to  insure  speedy  delivery.  The  wealth  of  the  companies 
was  so  gi'eat,  and  their  infliience  ramified  so  far,  that  the  man- 
agement of  railroads  in  a  great  degree  passed  under  their  con- 
trol. Officers  of  the  latter  corporations  suddenly  found  them- 
selves considerable  holders  of  express  stocks,  or  openly  received 
bribes.  The  result  was  that  some  of  these  officials  observed 
with  indifference,  or  even  connived  at,  the  great  inroads  which 


392  THE   RAILROAD    SYSTEM. 

the  express  system  was  making  on  the  legitimate  freighting 
business  of  their  Unes,  and  nothing  was  practically  done  to 
check  the  rapid  growth  of  the  express  companies,  until  the 
system  of  "time  freights"  was  inaugurated  by  the  railroads 
themselves,  in  1858.  This  was  the  first  step  taken  by  them 
towards  the  resumption  of  their  legitimate  business,  and  this 
was  forced  upon  the  roads  by  the  strenuous  exertions  of  busi- 
ness men.  The  system  of  time  freights  once  inaugurated,  the 
attention  of  railroad  managers  was  soon  aroused  to  the  possible 
profits  to  be  derived  from  its  development.  Naturally,  this 
development  took  the  form  of  a  job.  Certain  men,  controlling 
great  through  lines,  conceived  the  idea  of  forming  a  company 
which  should  be  nothing  more  than  an  immense  freight  ex- 
press line,  owning  its  own  cars  and  charging  its  own  prices, 
while  the  railroads  were  to  supply  only  road-beds  and  motive- 
power,  and  charge  tolls  for  drawing  cars  over  their  lines.  The 
system  of  moving  freights  by  canal,  in  accordance  with  which 
all  the  original  railroad  charters  were  drawn,  was  in  fact  re- 
vived and  applied  to  railroads.  This  scheme  promised  to  carry 
to  the  last  possible  point  of  development  the  express  system. 
The  business  of  carrying  freights  in  their  own  interest  was  to 
be  surrendered  by  the  railroad  companies,  who  were  hence- 
forth to  devote  themselves  to  the  transportation  of  passengers 
and  the  dragging  of  freight-cars.  If  properly  instituted,  and 
regulated  with  thorough  impartiality,  with  a  view  to  a  per- 
fectly free  competition  between  firms  engaged  in  the  shipping 
business,  such  a  system  would  not  be  without  its  advantages. 
It  would  create  a  division  of  labor,  and,  if  favoritism  were 
excluded,  would  tend  to  stimulate  competition.  It  was,  how- 
ever, brought  forward  with  no  such  views.  The  men  who 
devised  it  controlled  the  roads  over  which  it  was  to  be  put  in 
operation.  Competition  was  the  last  thing  they  had  in  view  j 
on  the  contrary,  they  proposed  to  monopolize  in  tlieir  private 
hands  the  whole  lucrative  business  of  time  freights.  It  was 
an  immense  job.  The  credit  of  defeating  this  mgenioiis  plan 
belongs,  it  is  said,  to  the  president  of  a  leading  New  England 
road.     His  concurrence  in  the  enterprise  was  essential  to  its 


RAILROAD    COxXSOLIDATION.  393 

success ;  but,  when  the  plan  was  submitted  to  him,  he  refused 
to  have  anything  to  do  with  it,  except  in  his  official  capacity 
and  in  the  interest  of  his  road.  He  saw  at  once  the  great  im- 
poi'tance  of  the  scheme,  and  how  profitable  it  might  be  made, 
biit  he  insisted  that  the  roads,  and  not  individuals,  should  be 
the  parties  to  it,  and  that  to  them  all  the  profits  should  accrue. 
This  action  on  his  part  ultimately  led  to  the  formation  of  the 
earliest  of  what  are  known  as  the  "  colored  lines."  It  was 
organized  in  1865,  and  was  substantially  a  corporation  within 
a  corporation.  Certain  contracting  roads  between  the  west 
and  tide-water  combined  in  contributing  a  number  of  cars,  all 
of  which  wei-e  to  be  distinguished  by  a  uniform  color.  These 
were  to  transport  freights,  under  special  conditions,  from  any 
point  of  reception  to  any  point  of  delivery  on  the  connecting 
roads.  The  machinery  for  the  collection  and  disbursement 
of  money  was  the  simplest  possible  A  clearing-house  was 
established,  the  duties  of  which  were  confined  to  keej^ing  a 
record  of  the  miles  run  by  the  cars  of  the  various  roads  in  the 
combination,  and  to  striking,  accordingly,  a  balance  of  credit 
or  debit  each  month.  A  small  percentage  upon  the  amount 
invested  was  then  charged  for  wear  and  tear,  and  a  balance- 
sheet  forwarded  to  each  company.  All  transactions  in  regard 
to  freights  were  settled  in  cash  when  they  took  place,  and  no 
receipts  were  returned  to  the  clearing-house.  A  business  in- 
volving millions  each  month  could  thus  be  done  on  the  pay- 
ment of  trifling  monthly  balances.  The  growth  of  this  system 
has  been  one  of  the  marvels  of  railroad  development.  So  far 
as  the  business  of  transporting  freight  is  concerned,  it  will  be 
seen  at  once  that  tliese  organizations  effected  a  practical  con- 
solidation of  all  the  roads  interested  in  them.  The  result 
hitherto  has  been  one  of  almost  unmixed  good.  Kesponsi- 
bility  was  secured ;  consignees  were  no  longer  bandied  about 
between  numerous  disconnected  forwarders,  each  one  of  whom 
shoved  liability  off  upon  his  neighbor.  Promptitude,  also, 
was  secured  by  the  introduction  of  time  contracts.,  and,  ■with. 
simplicity,  of  course  came  economy. 

There  are  three  peculiarly  significant  featuixjs  in  the  history 
17* 


394  THE  RAILROAD  SYSTEM. 

of  these  organizations,  —  the  creation  of  corporations  within 
corporations,  the  estabhshment  of  a  clearing-house,  and  the 
rapid  growth  of  the  system.  It  is  not  impossible  that  these 
innovations  may  result  in  a  revolution  of  the  freighting  busi- 
ness, perhaps  of  the  railroad  sj'stem.  The  essential  feature  of 
the  organization  is  the  combining  of  roads,  whether  competing 
or  connecting,  through  the  machinery  of  a  clearing-house. 
This  once  established,  the  extent  of  its  possible  development 
cannot  be  forecast.  If  a  corporation  within  a  corporation,  in- 
cluding, as  it  easily  might,  a  central  tribunal  practically  em- 
powered to  enforce  its  own  judgments  should  gradually  be  de- 
veloped out  of  this  beginning,  it  is  more  than  probable  that 
the  days  of  railroad  competition  would  be  numbered.  It  is 
absurd  to  suppose  that,  after  the  creation  of  such  a  central 
power,  the  force  necessaiy  to  make  its  decision  effective  would 
be  wanting.  No  single  member,  however  powerful,  of  a  com- 
bination of  the  sort  suggested,  could  afford  to  rebel,  when  the 
immediate  result  of  so  doing  would  be  that  it  would  be  thrown 
out  of  the  clearing-house  and  its  connections  cut. 

Neither  will  it  be  possible  to  meet  by  legislation  such  a  con- 
tingency as  that  suggested.  Congress  or  State  legislatures 
may,  indeed,  enact  by  statute  that  connecting  roads  shall  re- 
ceive freights  from  or  deliver  them  to  any  recusant  line  ;  but 
here  their  power  stops.  They  cannot  by  any  law,  no  matter 
how  stringent  or  cunningly  devised,  control  the  direction  which 
may  be  given  to  the  immense  mass  of  freight  which  merely 
seeks  a  transit  from  one  part  of  the  continent  to  another; 
neither  can  they  dictate  as  to  the  use  of  rolling-stock,  which 
includes  the  vital-point  of  breaking  bulk.  Both  of  these  mat- 
ters obey  a  law  of  their  own,  and  merchandise  once  passing 
under  the  control  and  into  the  cars  of  a  combination,  will,  of 
necessity,  follow  the  channel  into  which  it  is  directed.  No  re- 
lief cotild  bo  found  from  this  quarter,  even  supposing  that  a 
combination  wielding  the  immense  political  influence  which 
would  be  possessed  by  that  suggested  could  not  regulate  legis- 
lation to  suit  itself.  The  present  time-freight  lines  may,  there- 
fore, contain  the  germ  of  that  consolidation  which  shall  wold 


EAILROAD   CONSOLIDATION.  395 

the  railroad  interests  together  as  one  body,  and  give  to  them 
the  unity  and  concentration  which  hitherto  they  have  notori- 
ously lacked.  This  result  of  the  experiment  of  1865  would 
seem  by  no  means  so  unlikely  as  that  from  one  carpet-bag  in 
1838  should  spring  the  present  express  system  of  America. 

It  is  much  the  custom  among  those  who  discuss  this  consoli- 
dating phase  in  the  development  of  a  great  system  to  denounce 
it  as  an  unmitigated  commercial  and  political  evil.  It  remains 
to  consider  whether  these  judgments  are  fully  warranted.  So 
far  as  the  interests  of  commerce  and  of  intercourse  in  general 
are  concerned  such  conclusions  do  not  seem  to  be  sustained  by  a 
calmer  examination  of  the  results  in  so  far  as  they  are  yet  devel- 
oped. On  the  contrary,  it  may  safely  be  asserted  that,  taken 
as  a  whole,  the  advance  hitherto  made  in  the  direction  of  a 
closer  and  more  perfect  combination  has  been  highly  beneficial 
to  the  best  interests  both  of  trade  and  of  travel.  All  decla- 
mation to  the  contrary  notwithstanding,  this  conclusion  hardly 
admits  of  a  doubt.  Even  in  the  case  of  the  Pennsylvania  coal 
combination,  unjustifiable  as  in  many  respects  it  was,  so  far  as 
the  material  interests  of  the  whole  country  were  concerned  a 
responsible  combination  even  of  monopolies,  insuring  a  steady 
supply  at  regular  prices,  was  preferable  to  the  chronic  chaos 
previously  existing.  This  case,  however,  was  purely  excep- 
tional. As  a  general  rule  it  will  scarcely  be  maintained  that 
it  is  to  small,  local  or  disconnected  lines  that  the  public  now 
looks  for  the  last  conveniences  and  comforts  of  travel,  or  for 
the  most  prompt  and  cheapest  transportation  of  freight.  On 
the  contrary,  it  is  only  the  consolidated  corporations  whose 
means  admit  of  that  freedom  of  expenditure  and  minute  divi- 
sion of  labor  which  is  essential  to  perfect  ease  of  modera  move- 
ment, whether  of  merchandise  or  of  persons.  It  may  in  fact 
be  broadly  stated  as  a  general  rule,  to  which  no  exceptions 
exist,  that,  wherever  there  is  a  break  in  management  in  the 
railroad  system,  the  intercourse  of  the  community  experiences 
a  jar  or  shock,  the  sense  of  which  is  lessened  in  the  exact 
degree  in  which  such  break  of  management  is  overcome  by  a 
closer  connection. 


396  THE    RAILROAD    SYSTEM. 

It  may  be  argiied  that  this  applies  only  to  the  combination 
of  connecting,  and  not  to  that  of  competing  lines.  It  is  by 
no  means  clear,  however,  whether,  when  fairly  considered  in 
all  its  aspects,  even  this  distinction  is  well  taken.  The  sub- 
ject has  already  been  somewhat  discussed  in  its  connection 
with  railroad  competition  and  the  practice  of  "  pooling  prof- 
its." On  the  one  side  are  to  be  estimated  the  decided 
advantages  of  the  superior  promptness  and  convenience,  the 
desire  to  secure  every  improved  appliance,  whether  of  comfort 
or  safety,  which  results  from  a  competition,  which,  in  these 
respects,  is  always  felt,  and  also  the  more  modified  advan- 
tage of  charges  which  are  occasionally  unduly  low  ;  —  upon  the 
other  hand,  it  is  to  be  remembered  that  competition  is  con- 
fined to  points  of  convergence,  that  excessive  local  rates 
always  make  good  depressed  through  rates,  that  violent  fluc- 
tuations characterize  sharp  competition,  and,  finally,  that  the 
absence  of  responsibility  must  perpetuate  every  abuse.  Even 
tipon  this  point  we  are  by  no  means  without  a  practical  expe- 
rience. No  people  ever  enjoyed  more  fully  the  advantages  of 
competing  lines  than  did  the  inhabitants  of  certain  portions 
of  the  State  of  Vermont  during  the  long  struggle  between  the 
Vermont  Central  road  and  the  Rutland  &  Burlington  ;  each  of 
these  corporations  strove  for  years  to  steal  business  from  the 
other,  and  illustrated  every  feature  of  railroad  competition. 
After  more  than  fifteen  years  of  disturbance,  during  which  the 
people,  whom  the  roads  were  built  to  accommodate,  were  sacri- 
ficed to  their  quarrels,  the  companies  at  last  consolidated  amid 
public  rejoicing.  The  war  of  through  competition  and  local  suf- 
fering was  over,  and  one  uniform,  responsible  management  gave 
some  assurance  that  the  railroad  service  of  a  whole  commu- 
nity should  cease  to  be  the  shuttlecock  of  angry  combatants. 

Neither  are  the  political  considerations  connected  with 
these  vast  corporations  often  fairly  considered.  The  evils 
under  our  form  of  government  connected  witlj  railroad  legis- 
lation, in  any  shape,  cannot  easily  be  overstated.  It  is  very 
»|Ucstionable,  however,  whether  they  arc  jiggravatod  by  the 
existence  of  gi*eat  con.solidations.     One  fact  is  to  be  l)onic  in 


RAILROAD   CONSOLIDATION.  397 

mind.  If  the  political  power  of  the  large  consolidation  is 
great,  so  also  is  the  jealousy  and  apprehension  excited  by  it. 
In  this  respect  also,  there  comes  in  the  important  element  of 
responsibility  ;  —  the  great  corporation  presents  a  point  upon 
which  the  force  of  public  opinion  can  be  concentrated ;  —  it 
thus  bears  with  it  its  own  element  of  weakness.  This  is  not 
the  case  with  smaller  companies.  They  can  and  do  combine 
for  political  action  with  most  pernicious  results  to  the  public ; 
but  in  this  case,  though  the  power  is  in  reality  greater,  the 
responsibility  is  wholly  divided  away.  What  is  known  as 
"log-rolling"  is  probably  the  most  familiar  form  of  legislative 
corruption  in  general  use  in  America.  No  bribes  are  paid,  no 
money  changes  hands,  but  a  regular  tiTick-and-dicker  of  votes 
takes  place,  through  which  wholly  incongruous  schemes  are 
lumped  together  and  passed,  regardless  of  opposition.  In  this 
contemptible  science  the  lesser  railroad  corporations  are  apt  to 
be  the  most  thorough  proficients.  Each  has  its  little  baud  of 
friends,  and  each  is  apt  to  want  its  rag  of  special  legislation. 
Individually,  they  are  powerless,  but  in  combination  with  the 
friends  of  every  other  doubtful  measure  they  are  irresistible. 
Their  obscurity  is  their  great  protection.  From  behind  it 
they  raise  the  cry  against  the  larger  companies,  concerning 
which  a  jealousy  is  known  to  exist,  and,  while  the  public  at- 
tention is  absorbed  in  another  direction,  they  quietly  secure 
their  plunder.  To  a  large  corporation,  on  the  other  hand, 
there  attaches  in  some  degree  that  responsibility  which  be- 
longs to  a  high  public  official.  Its  agents  are  known,  its 
operations  are  jealously  watched,  it  can  be  held  to  a  public 
account.  Where,  in  short,  it  would  be  perfectly. feasible  for  the 
community  to  meet  and  control  a  single  agent,  all  experience 
goes  to  show  that  a  dozen  may  nm  riot. 

As  regards  the  consolidation  of  railroads,  therefore,  the  case 
may  be  summed  up  somewhat  as  follows.  Both  railroad  com- 
bination and  railroad  consolidation,  are  the  legitimate  and  in- 
evitable consequence  of  railroad  competition,  and,  as  such,  like 
all  other  phases  of  natural  development,  are  not  easily  to  be 
restrained  by  legislative  enactments.    That  they  may  not  result 


398  THE   RAILROAD    SYSTEM. 

in  serious  political  and  material  complications  is  by  no  means 
clear,  but  these  are  not  likely  to  be  of  the  character  hitherto 
anticipated.  If,  as  now  seems  to  be  the  case,  the  exigencies 
of  our  civilization  force  upon  us  this  concentrating  process, 
tiiere  must  ultimately  result  a  condition  of  things  which  can 
be  resolved  only  in  one  of  two  ways  ;  —  either  the  community, 
as  it  has  already  done  in  certain  of  the  States,  miist  face,  and 
endeavor  to  control,  a  recognized  railroad  monopoly  in  respon- 
sible private  hands ;  or  it  must  directly,  in  a  greater  or  less 
degree,  take  i^art  in  its  management,  thus  recognizing  the 
control  of  the  railroad  system  as  one  of  the  necessary,  and  for 
that  reason,  legitimate  functions  of  every  government.  At 
present,  as  respects  consolidation,  both  the  railroad  system 
and  public  opinion  are  in  a  state  of  simple  confusion.  Vague 
denunciation  and  crude  statute  enactments  have  hitherto 
usurped  the  place  of  reason  and  mature  action,  and  it  now 
remains  to  be  seen  what  effect  they  will  have  upon  a  develop- 
ment which  they  may  distort  but  cannot  prevent. 


CHAPTER   IV. 

STOCK-WATERING. 

PROPERLY  speaking  stock-watering  is  the  reappraisal  by 
its  owners  of  a  corporate  property  which  has,  or  is  al- 
leged to  have,  increased  in  value  on  their  hands,  without  any 
new  outlay  upon  their  ])art,  and  the  issue  to  themselves  of  new 
evidences  of  value  equal  to  such  supposed  increase.  It  is 
indisputable  that,  as  regards  railroads,  this  practice  has  been 
not  infrequently  very  grossly  abused,  especially  of  late  years, 
and  that  these  abuses  of  it  now  impose  a  very  heavy  addi- 
tional burden  upon  the  cost  of  transportation.  Fraudulent 
and  secret  issues  of  stock  by  connipt  managements  or  dishon- 
est officials  have  also  contributed  to  this  result,  but  the  trans- 
action in  this  case  differs  from  strict  stock-watering  in  much 


STOCK-WATERING.  399 

the  same  way  as  the  money  of  coiinterfeitei's  differs  from 
excessive  issues  by  government  of  irredeemable  legal  tenders. 
Both  processes  directly  inflate  the  volume  of  the  securities 
which  represent  the  value  of  the  railroad  system,  and,  in  so 
fir,  constitute  stock-watering,  but  while  the  first  is,  strange  to 
say,  legitimate  in  character,  the  last  is  a  mere  fraud. 

In  America,  as  in  P^ngland,  the  private  corporation  owning 
the  thoroughfare  is  the  basis  of  the  whole  railroad  system. 
In  thus  surrendering  the  control  of  this  system  out  of  its  own 
hands,  the  community  as  a  rule  made  one  and  but  one  reser- 
vation in  its  own  favor ;  it  was  almost  universally  stipulated 
that  the  rate  of  profit  upon  the  capital  invested  in  the  work 
of  construction  should  not  exceed  a  certain  annual  percentage, 
varying,  according  to  locality,  from  10  to  20  per  cent.  Within 
this  limit  the  corporations  were  free  to  earn  and  to  divide  all 
that  they  could. 

This  constituted  the  railroad  usury  law,  and  like  all  usury 
laws  was  an  exceedingly  clumsy  contrivance.  It  had  two  ob- 
vious defects  ;  no  provision  was  made  for  ascertaining  the  real, 
as  contradistinguished  from  the  nominal  cost  of  any  road,  and 
nothing  was  said  in  regard  to  arrears  of  unpaid  dividends.  It 
was  absurd  to  suppose  that  even  the  most  honest  capitalist 
would  accept  the  strict  construction  of  a  law  which  insured 
him  a  certain  loss  in  each  bad  year  or  unprofitable  enterprise, 
and  limited  him  in  case  of  success  to  a  reasonable  profit.  Of 
course,  therefore,  the  law  was  no  sooner  enacted  than  it  was 
circumvented.  How  this  was  done  in  England  has  already 
been  stated,  but  it  is  in  America  that  the  process  has  been 
conducted  on  the  most  magnificent  scale.  The  principle  oper- 
ated upon  in  both  countries  was  the  same.  The  doubt  raised 
was  whether  the  stipulated  percentage  was  to  be  paid  upon 
what  the  property  cost  its  holders,  or  upon  what  it  was  actu- 
ally worth.  Interpreting  it  in  the  way  last  specified,  the  cap- 
italist proceeded  to  act  accordingly.  The  result  as  a  whole 
bids  fair  to  be  most  disastrous,  and  yet,  in  not  a  few  cases,  it 
is  very  difficult  to  take  any  just  exception  to  it.  Many  roads 
were  constructed,  and  proved,  if  not  commercial  faihu'es,  very 


400  THE   RAILROAD   SYSTEM. 

gradual  successes;  for  years  no  dividends  were  paid,  —  the 
money  which  should  have  gone  to  dividends,  which  rightfully 
belonged  to  the  capitalists,  was  absorbed  in  construction. 
Fairly  speaking,  this  was  so  n)uch  new  capital  belonging  to  the 
ownei-s,  and  by  them  invested  in  the  enterprise  ;  just  as  much 
so  as  if  the  allotted  dividends  had  been  paid  to  the  stock- 
holder and  by  him  instantly  handed  back  to  the  treasurer  of 
the  companj'.  In  the  vast  majority  of  other  cases  very  small 
dividends  were  paid,  far  below  the  limit  fixed  in  the  law,  and 
the  balance  found  its  way  into  construction.  In  all  of  these 
instances  heavy  arrears  accumulated  against  the  property,  and 
these  arrears  might  fairly  and  justly  be  claimed  as  capital, 
actually  paid  in,  and  which  should  be  represented  by  evidences 
of  value.  Wherever  stock  was  issued  under  such  circum- 
stances the  operation  would  not  seem  justly  open  to  criticism. 
The  difficulty  was  that  no  provision  whatever  had  been  made 
in  the  law  to  meet  the  case.  It  therefore  devolved  upon  the 
ownei-s  of  the  property  to  cast  up  the  balance-sheet  themselves, 
and  to  decide  all  nice  points,  undoubtedly  in  their  own  favor. 
Where  a  people  so  provides  for  its  own  interests  it  needs  no 
prophet  to  foretell  the  consequences.  No  landlord  deals  in 
this  way  with  a  tenant. 

The  history  of  the  companies  which  have  been  consoli- 
dated into  what  is  known  as  the  Pittsburg  Fort  Wayne  &, 
Chicago  Railroad,  furnishes  a  very  fair  illustration  of  what 
may  be  expected  to  ensue  from  this  disregard  of  ordinary 
precautions.  Here  the  process  of  watering  was  early  com- 
menced, as  a  simple  and  desperate  expedient  for  raising 
money  at  an  enormous  discount  for  the  purpose  of  complet- 
ing an  enterprise  of  doubtful  success.  In  the  earlier  history 
of  one  of  these  companies  we  read  :  "  The  stock  subscriptions 
which  were  paid  in  cash  into  the  treasury  of  the  company  were 
very  small,  —  amoimting  perhaps,  in  all,  to  less  than  three 
per  cent  on  the  final  cost  of  building  and  equipping  the  road. 
The  stock  subscriptions  were  paid  for  mostly  in  uncultivated 
lands,  fanns,  tovni  lots,  and  labor  ujx)n  tlie  road."  Of  the 
whole  road  as  it  stands  we  are  told,  that,  "  of  the  $  18,603,870, 


STOCK-WATKRIXG.  401 

now  representing  the  cost  of  the  road  and  eqiiipment,  &c.,  the 
shareholders  contributed  in  cash  only  about  ten  per  cent,  or 
less  than  $2,000,000 ;  and  their  contributions  in  cash,  bonds, 
notes,  lands,  and  personal  property,  labor,  &c.,  amounted  to 
something  less  than  $4,000,000,  or  rather  more  than  twenty 
per  cent  of  the  present  cost  of  the  work.  The  difference  be- 
tween this  sum  and  the  capital  stock  as  now  shown  by  the 
books  of  the  company,  is  made  up  of  dividends  which  wei'e 
paid  in  stock,  interest  on  stock  ^:)ai<i  in  stock,  premium  on 
stock  allowed  to  stockholders  at  the  time  of  consolidation, 
which  was  paid  in  stock,  and  a  balance  of  stock  still  held  by 
the  trustees. 

This,  however,  was  in  the  early  days  of  the  enterprise,  the 
days  of  doubtful  success,  when  the  stock  was  thought  worth- 
less, and  was  almost  given  away.  But  in  1866  a  new  era 
dawned  upon  the  Fort  Wayne  road ;  it  began  to  pay  divi- 
dends. In  1870  the  stock  of  the  company,  the  history  of 
a  portion  of  which  has  just  been  given,  stood  at  $  11,500,000, 
while  its  indebtedness  amounted  to  about  $  13,600,000  more, 
being  in  all  some  $1,150,000  above  the  cost  of  road  and 
equipment  as  they  stood  upon  the  books  of  the  company. 
In  June  of  this  year,  a  lease  was  effected  of  the  entire  prop- 
erty by  the  Pennsylvania  Railroad  Company.  The  Fort 
Wayne  stockholders  had  their  option  between  annual  divi- 
dends of  12  per  cent  on  the  stock  then  in  existence,  or  the 
more  moderate  rate  of  7  per  cent  on  a  proportionately  in- 
creased amount.  They  wisely  chose  the  latter,  and  forthwith 
the  $11,500,000  of  stock  became  $  19,714,000, —while  the 
road  which  was  claimed  to  have  cost  only  $  24,000,000,  was 
suddenly  represented  by  $  33,400,000  of  securities,  none  of 
which  bore  a  less  interest  than  7  per  cent. 

The  great  masterpieces  of  Commodore  Vanderbilt  have,  how- 
ever, so  eclipsed  all  other  performances  in  this  line  that  they 
may  be  said  to  constitute  an  epoch  in  the  history  of  paper  infla- 
tion, —  it  might  also  be  said  of  bubble-blowing.  It  is  only 
necessary,  therefore,  in  this  connection,  to  recount  the  history 
of  the  chain  of  roads,  now  reduced  in  number  to  two,  which 


402  THE   RAILROAD    SYSTEM. 

connect  New  York  and  Chicago  by  way  of  Albany.  The  dis- 
tance between  these  points  is  982  miles.  It  is  useless  to 
begin  the  story  further  back  than  1852,  when  the  through 
line  was  completed,  consisting  of  sixteen  independent  links, 
several  of  which  were  themselves  made  up  of  numerous 
smaller  and  once  independent  roads.  That  was  a  year  of 
active  and  much  needed  consolidation.  The  New  York  Cen- 
tral led  off  under  a  special  act  of  legislatui-e.  Eleven  roads 
went  into  the  consolidation  with  an  aggregate  capital  of  $  23,- 
235,600.  The  stock  lowest  in  value  of  the  eleven  was  set- 
tled upon  as  the  par  of  the  new  concern,  and  the  stocks  of 
the  other  ten  companies  were  received  at  a  premium  varying 
from  17  to  55  per  cent.  By  this  simple  financial  arrange- 
ment, $  8,894,500  of  securities,  of  which  not  one  cent  was 
ever  represented  by  property,  but  which  in  reality  consti- 
tuted so  much  guaranteed  stock,  was  made  a  charge,  princi- 
pal and  interest,  against  future  income.  This  was  the  price 
paid  to  get  rid  of  the  vested  rights  which  had  been  allowed 
to  settle  down  upon  this  thoroiighfare.  Between  1852  and 
1868  the  stock  and  indebtedness  of  the  consolidated  com- 
pany had  been  increased,  for  one  reason  or  another,  until, 
when  Mr.  Vanderbilt  became  president  in  the  latter  year, 
they  amounted  in  round  numbers  to  $  40,000,000,  represent- 
ing a  road  which  its  construction  account  showed  had  cost 
$  36,600,000.  Vanderbilt  had  for  some  years  been  i)resident 
of  the  Hudson  River  road,  and,  as  such,  in  1867  had  doubled 
its  capital  stock,  ($  7,000,000),  calling  in  50  per  cent  of  the 
increased  amount  and  thus  watering  to  the  extent  of  $  3,500,- 
000.  Extending  his  control  over  the  Central,  he  now  proceed- 
ed to  better  his  previous  instructions.  A  stock  dividend  of 
80  per  cent,  not  a  dollar  of  which  was  called  in,  was  suddenly 
declared.  Over  $  23,000,000  of  securities  were  thus  created 
at  once.  Operations  stood  still  at  this  point,  but  only  for  a 
moment.  The  next  measure  was  a  consolidation  of  the  Cen- 
tral and  the  Hudson  River  railroads.  This  was  effected  in  the 
succeeding  year  upon  a  stock  basis  of  $90,000,000;  —  a  fur- 
ther watering  of  27  per  cent  being  allotted  to  the  Central, 


STOCK-WATERING.  403 

while  the  turn  of  the  Hudson  River  road  now  having  come  again, 
there  was  provided  for  it  the  munificent  amount  of  85  per 
cent.  The  result  of  these  astounding  feats  of  financial  leger- 
demain was  that  a  property  which  in  1866  appeared  fi*om  its 
own  books  to  have  cost  less  then  $50,000,000,  and  which  was 
than  represented  by  over  $54,000,000  of  stock  and  indebted- 
ness, was  suddenly  shot  up  to  over  $  103,000,000  in  1870, 
upon  the  whole  of  which  interest  and  dividends  were  paid.  At 
the  same  time  the  cost  of  the  road  stood  upon  the  books  of 
the  company  at  less  than  $  60,000,000,  or  about  $70,000  per 
mile,  while  in  evidences  of  property  each  mile  was  charged 
with  no  less  than  $  122,000,  The  average  cost  of  railroads 
throughout  the  world  has  been  somewhat  less  than  $  100,000 
per  mile,  while  in  America  it  has  stood  at  about  half  of  that 
amount.  According  to  the  books  of  the  company  ovex 
$  50,000  of  absolute  water  has  been  poured  out  for  each  mile 
of  road  between  New  York  and  Buftalo, 

The  next  step  towards  Chicago  was  one  of  88  miles  to  Erie. 
This  was  made  up  of  a  consolidation  of  two  roads  effected  in 
1867,  which  went  in  with  $  2,800,000  of  capital  and  came  out 
with  $  5,000,000.  The  total  capital  account  of  the  company 
■was  then  a  trifle  over  $  .3,200,000.  In  1869  the  consolidation 
of  the  lines  between  Buffalo  and  Chicago  was  effected,  and 
this  road  became  a  party  to  it  with  $  6,000,000  of  stock  and 
$  4,000,000  of  indebtedness,  —  at  least  30  per  cent  of  water 
in  excess  of  all  cost  of  construction. 

The  next  step  in  the  line  is  one  of  96  miles  to  Cleveland ; 
this  was  filled  by  the  celebrated  Cleveland  Painesville  &  Ash- 
tabula road,  which  in  the  six  years  between  1862  -67  divided 
120  per  cent  in  stock,  33  per  cent  in  bonds,  and  79  per  cent 
in  cash.  Having  really  cost  less  than  $5,000,000  in  money 
it  was  consolidated  at  nearly  $12,000,000. 

The  next  step  was  from  Cleveland  to  Toledo,  148  miles. 
Here  it  was  that  Vanderbilt  began  his  operations,  for  in  1866 
he  secured  possession  of  this  road  and  signalized  his  adminis- 
tration of  its  aftairs  by  the  issuing  of  a  scrip  dividend  of  25 
per  cent  upon  its  $5,000,000  of  capital. 


404  THK   RAILROAD    SYSTEM. 

The  last  two  roads  were  consolidated  into  the  Lake  Shore 
road,  258  miles  in  length,  in  1867  ;  the  stock  and  indebted- 
ness of  the  new  company  was  $22,000,000.  In  1869  the 
work  of  consolidation  was  perfected  from  Buffalo  to  Chicago 
by  the  merging  of  all  the  connecting  links  into  the  Lake  Shore 
&  Michigan  Southern  Railroad  Co.,  operating  nearly  1,300 
miles  of  road,  represented  by  $57,000,000  of  stock  and  in- 
debtedness, which  was  increased  to  $02,000,000  in  1871,  and 
which  it  had  the  further  privilege  of  increasing  to  about 
$73,000,000.  These  figures  throw  a  very  curious  light  upon 
the  real  cost  of  railroad  construction  in  America.  They  rep- 
resent a  nominal  outlay  of  but  $  48,000  per  mile,  and  yet 
it  is  not  denied  that  in  the  amount  was  included  $  20,000,000 
of  fictitious  capital.  These  roads,  not  improbably,  may  have 
cost  those  who  constructed  them  in  cash,  actually  paid  in  either 
directly  in  money  or  in  dividends  which  had  never  been  drawn 
out,  the  full  amount  of  the  consolidation  capital.  The  profits 
had,  it  is  true,  been  very  unequally  divided,  but  substantial 
justice  was  done  in  the  end ;  what  had  been  lost  in  one  road 
was  made  good  in  another,  but  as  a  whole  the  community  was, 
perhaps,  paying  for  nothing  which  it  had  not  received.  No 
credit  on  this  account  is  due  to  those  managing  the  affairs  of 
the  company.  They  undoubtedly  regarded  the  Vanderbilt 
operations  as  masterpieces  of  railroad  management,  and  only 
regretted  that  the  earnings  of  the  company  under  their  con- 
trol could  by  no  possibility  justify  any  similar  performances ; 
and  yet  the  contrast  between  the  results  hitherto  arrived 
at  upon  this  line,  under  a  system  of  moderate,  average  water- 
ing, and  those  achieved  further  east  by  Vanderbilt  is  sin- 
gularly suggestive.  It  is  probably  safe  to  say  that  the 
Vanderbilt  stock-waterings  between  Buffalo  and  New  York  an- 
nually cost  the  American  people  not  less  than  $  3,000,000  in 
excess  of  all  remuneration  which  ever  under  any  construc- 
tion of  right  belonged  to  the  owners  of  the  lines.  Under 
these  circumstances  it  would  seem,  judging  by  the  example 
of  the  Lake  Shore  road,  that  comparatively  legitimate  and 
reasonable  waterings  should  satisfy  any  one  not  inordinately 
rapacious. 


STOCK-WATEHIXd.  405 

The  scieuce  of  stock-watering  as  thus  far  described  had  not 
yet,  however,  attained  perfection ;  in  fact  had  not  gone  beyond 
the  English  precedents.  What  might  be  called  the  American 
system  remains  to  be  described.  The  stock  of  corporations  is 
in  this  country  given  away  as  a  sort  of  gratuity,  —  the  right 
to  direct  railways  and  to  tax  trade  is  habitually  thrown  in 
as  a  makeweight.  In  the  earlier  days  of  railroad  financier- 
ing it  would  naturally  have  seemed  almost  impossible  to 
accomplish  such  a  result,  but  time  and  experience  brought 
even  this  about.  It  originated  in  the  system  of  railroad 
mortgages.  Very  early,  and  very  naturally  in  the  immature 
days  of  the  system,  attempts  were  made  to  construct  railways 
upon  an  insufficient  capital.  Funds  gave  out  before  the  en- 
terprises were  half  developed,  and  projectors  had  their  election 
between  abandonment  or  progress  at  any  price.  The  obvious 
resource  was  to  mortgage  the  property  already  in  existence. 
Soon  the  market  was  weighed  down  with  every  conceivable 
description  of  railroad  security.  First  there  was  a  floating 
debt ;  then  preference  stock,  to  be  followed  in  rapid  suc- 
cession by  first,  second,  and  third  mortgages;  construction 
and  equipment  bonds  closing  up  the  dreary  procession,  which 
not  seldom  ended  at  the  tomb  of  a  receivership.  All  these 
evidences  of  indebtedness  were,  however,  secxired  on  property 
really  in  existence.  The  art  was  not  at  once  discovered  of 
mortgaging  something  thereafter  to  be  created.  Presently 
new  roads  were  projected,  the  business  of  railroad  construction 
and  financiering  being  now  reduced  to  a  system.  The  country 
through  which  these  roads  were  to  pass  was  young  and  poor, 
and  capital  had  to  be  brought  in  from  outside.  There  was 
abundance  of  it,  but  the  risk  involved  was  great,  and  the 
temptation  to  incur  it  must  not  be  small.  In  the  first  place, 
the  new  road  as  ap  enterprise  promises  well.  The  next  thing 
is  to  raise  the  money  necessary  to  construct  it.  This  is  done, 
not  by  laj-ing  an  assessment  upon  the  stock,  —  that  is  not 
heard  of  as  yet,  and  has  no  value  in  the  market,  —  it  exists 
only  in  name.  In  place  of  this,  the  bonds  are  put  upon  the 
market   at  a  stated  price,   which,   or  a  portion  of  which,    is 


406  THE   RAILROAD    SYSTEM. 

advanced  by  the  capitalist,  and  construction  is  carried  on 
with  the  proceeds.  The  stock  itself  then  passes  as  a  gratu- 
ity into  the  hands  of  those  advancing  money  upon  the  bonds. 
The  result  is,  that  by  this  ingenious  expedient  the  capitalist 
holds  a  mortgage,  paying  a  secured  and  liberal  interest,  ,on 
his  own  property,  which  has  been  conveyed  to  him  forever 
for  nothing.  The  stock  is  at  once  nothing  and  everything. 
Given  away,  the  donees  own  and  manage  the  road,  and, 
receiving  a  fixed  and  assured  interest  upon  their  bonds,  en- 
joy a  further  right  to  exact  an  additional  sum,  and  one  as 
large  as  they  are  able  to  make  it,  from  the  developing  business 
of  the  country,  as  dividends  on  the  stock.  Instances  of  this 
form  of  railroad  financiering  need  not  be  specified,  for  it 
is  now  the  common  course  of  Western  railroad  construction. 
The  new  country  needs  its  railroads,  and  is  willing  to  pay  any- 
thing for  them,  while  the  capitalists  of  the  old  country  specify 
their  own  terms  of  construction,  which  are  only  too  eagerly 
accepted. 

So  far  as  those  immediately  involved  in  these  transactions 
are  concerned  no  exception  can  be  taken  to  them.  Both  are 
fair  and  equal  contracting  parties,  and  both  understand  the 
bargain  they  make.  The  occupant  of  the  new  country  wants 
his  railroad,  and  the  capitalist  is  asked  to  embark  his  means 
in  an  enterprise  full  of  risk.  They  both  make  the  best  terms 
they  can,  but  the  terms  are  made  in  advance ;  there  is  no 
fraud  and  no  chicane.  While,  therefore,  the  contract  is  not 
unfair  as  a  private  transaction,  as  a  matter  of  public  policy 
such  a  method  of  railroad  construction  cannot  but  excite  very 
lively  apprehensions  for  the  future.  The  community,  in  its 
over  eagerness  to  stimulate  construction  beyond  all  healthy 
limit,  i^  continually  l)inding  itself  to  conditions  which  here- 
after it  will  find  very  hard  to  fulfil. 

The  absolute  disposal  of  the  control  of  a  road  and  all  its 
securities,  on  condition  that  it  is  built,  would  seem  to  be  a 
contract  of  a  sufficiently  sweeping  nature,  and  it  certainly 
marks  the  limit  of  legitimate  railroad  construction.  Not 
seldom,   however,    the   embryotic   enterprise  is  bolstered  up 


STOCK-WATKRING.  407 

extraneously.  Simple  mortgages  are  not  sufficient,  and  the 
credit  of  tiie  road  is  guaranteed  by  land-grants,  or  by  na- 
tional or  state  or  town  or  county  loans,  or  by  the  credit  of 
connecting  or  established  lines,  or  by  any  or  all  of  these 
combined.  Every  expedient  which  the  mind  of  man  can  de- 
vise has  been  broiight  into  play  to  secure  to  the  capitalist 
the  largest  possible  profit,  with  the  least  possible  risk.  The 
Pacific  Railroad  furnishes  a  fine  example  of  all  these  ingen- 
ious devices.  In  speaking  of  this  enterprise  it  is  not  pleasant 
to  adopt  a  tone  of  criticism  towards  the  able  and  daring  men 
who  with  such  splendid  energy  forced  it  through  to  com- 
pletion. It  was  a  work  of  great  national  import  and  of  untold 
material  value.  Those  who  took  its  construction  in  hand  in- 
curred great  risk,  and  at  one  time  trembled  on  the  verge  of 
ruin.  This  enterprise  was  to  them  a  lottery,  in  which  they 
might  well  draw  a  blank,  bvit,  should  they  draw  a  j^rize,  the 
greatness  of  the  prize  must  justify  the  risk  incurred.  The 
community  asked  them  to  assume  the  risk,  and  was  willing  to 
reward  their  success.  Success  was  thought  to  be  well  worth  all 
it  might  cost.  At  the  same  time  the  process  of  construction 
afforded  a  curious  example  of  the  methods  through  which 
fictitious  evidences  of  value  can  be  piled  upon  each  other. 
The  length  of  the  imited  road  was  1919  miles,  and  the  cost 
of  construction  was  estimated  at  $60,000,000.  To  meet  this 
outlay  a  stock  capital  was  authorized  of  $100,000,000  for  each 
of  the  two  great  divisions  of  the  line ;  upon  this,  however,  no 
dependence  was  placed  as  a  means  of  raising  money  ;  it  was 
only  a  debt  to  be  imposed,  if  possible,  on  the  future  business 
of  the  country.  A  curious  mystery  hangs  over  th\s  part  of 
the  financial  arrangements  of  the  concern.  Probably  not 
$20,000,000  ever  has  been,  or  ever  will  be,  derived  from  this 
source.  The  rest  is  very  clear.  There  was  the  government 
subsidy  of  $30,000  a  mile,  and  $30,000  a  mile  of  mortgage 
indebtedness  ;  there  was  a  land  grant  of  $  12,800  acres  a  mile, 
and,  where  there  were  States,  there  were  bonds,  with  interest 
guaranteed  by  the  State  and  gifts  of  real  estate  from  cities, 
where  cities  existed ;  and  there  were  even  millions  of  net  earn- 


4()8  THE   KAlLROAl)    SYSTEM. 

ing  applied  to  construction.  The  means  to  build  the  road  were 
not  grudgingly  bestowed.  Meanwhile,  of  the  real  cost  of  con- 
stniction  but  little  is  correctly  known ;  absolutely  nothing  in- 
deed of  the  western  division,  or  Central  Pacific.  Managed  by 
a  small  clique  in  California,  the  internal  arrangements  of  this 
company  were  involved  in  absolute  secrecy.  The  eastern 
division  was  built,  however,  by  an  organization  known  as  the 
Credit  Mobilier,  which  received  for  so  doing  all  the  unissued 
stock,  the  proceeds  of  the  bonds  sold,  the  government  bonds, 
and  the  earnings  of  the  road,  —  in  fact,  all  its  available 
assets.  Its  profits  were  reported  to  have  been  enormous,  and 
they  made  the  fortunes  of  many,  and  perhaps  of  most  of  those 
connected  with  it.  Who,  then,  constituted  the  Credit  Mobi- 
lier ?  It  was  but  another  name  for  the  Pacific  Railroad  ring. 
The  members  of  it  were  in  Congress ;  they  were  trustees  for 
the  bondholders,  they  were  directors,  they  were  stockholders, 
they  were  contractors ;  in  Washington  they  voted  the  sub- 
sidies, in  New  York  they  received  them,  upon  the  Plains  they 
expended  them,  and  in  the  Credit  Mobilier  they  divided  them. 
Ever-shifting  characters,  they  were  ubiquitous,  —  now  engi- 
neering a  bill,  and  now  a  bridge,  —  they  received  money  into 
one  hand  as  a  corporation,  and  paid  it  into  the  other  as  a 
contractor.  As  stockholders  they  owned  the  road,  as  mort- 
gagees they  had  a  lien  upon  it,  as  directors  they  contracted 
tor  its  construction,  and  as  members  of  the  Credit  Mobilier 
they  built  it.     What  is  the  community  to  pay  for  itl 

At  the  close  of  1870,  with  $103,000,000  of  their  capital  yet 
unsubscribed,  and  thus  reserved  for  issue,  should  the  earnings 
ot  tho  rojjids  at  any  future  period  make  watering  practicable  ; 
with  this  amount  ot  stock  in  reserve,  the  two  companies  oper- 
ated 2,083  miles  of  road,  represented  by  stock  and  debt  to  the 
amount  of  $240,000,000.  Thus  the  last  results  of  Vander- 
bilt's  genius  have  been  surpassed  at  the  very  oiitset  of  this 
enterprise.  The  line  from  Chicago  to  New  York  represents 
now  but  $60,000  to  the  mile,  as  the  result  of  many  years 
of  inflation,  while  the  hue  between  Omaha  and  Sacramento 
begins  hfe   with  the  cost  oi  $115,000  per  mile       It  would 


STOCK-WATERING.  409 

be  safe  to  say  that  the  road  cost  in  money  considerably  less 
than  one  half  of  this  sum.  .The  difference  is  the  price  paid 
for  every  vicious  element  of  railroad  construction  and  man- 
agement ;  costly  construction,  entailing  future  taxation  on 
trade ;  tens  of  millions  of  fictitious  capital ;  a  road  built  on 
the  sale  of  its  bonds,  and  with  the  aid  of  subsidies ;  every 
element  of  real  outlay  i-ecklessly  exaggerated,  and  the  whole  at 
some  future  day  is  to  make  itself  felt  as  a  burden  on  the  trade 
which  it  is  to  create. 

Enough  has  been  said  to  illustrate  the  bearing  which  stock- 
watering  and  extravagant  construction  have  iipon  taxation. 
It  would  be  useless  to  attempt  to  estimate  the  weight  of  the 
burden  imposed  through  these  means  upon  material  develop- 
ment. The  statistics  which  should  enter  into  any  reliable 
estimate  are  not  accessible,  and  any  approximation  would  be 
simply  a  matter  of  guess-work.  A  table  was  published,  dur- 
ing the  year  1869,  in  a  leading  financial  organ,*  comparing 
the  capital  stocks  of  twenty-eight  roads  as  they  stood  on  July 
1,  1867,  and  May  1,  1869.  During  those  twenty-two  months 
it  was  found  that  the  total  had  increased  from  $  287,036,000 
to  $400,684,000,  or  40  per  cent.  Carrying  the  comparison 
on  nine  of  these  roads  back  two  years  further,  it  was  found 
that,  in  less  than  four  years,  their  capitals  had  increased  from 
less  than  %  84,000,000  to  over  $  208,000,000,  or  150  per  cent. 
A  portion  of  this,  perhaps  25  per  cent  of  the  whole,  represents 
private  capital  actually  paid  in  and  expended ;  another  por- 
tion, perhaps  equally  large,  represents  dividends  the  payment 
of  which  was  foregone  and  the  money  applied  to  construction  ; 
the  whole  of  the  remainder  may  be  set  down  as  pure,  un- 
adulterated "  water,"  which  calls  for  an  annual  tax-levy  of 
some  three  or  four  millions  a  year. 

There  is,  however,  another  and  very  important  side  to  this 
question.  What  may  be  called  the  wrongs  of  the  community 
and  the  exactions  of  the  capitalist  have  alone  been  discussed 
hitherto.  It  now  remains  to  consider  the  subject  from  the 
capitalist  point  of  view.     Almost  every  balance-sheet  presents 

*  The  Commercial  and  Financial  Chronicle  of  May  15,  1869. 
18 


410  THE  RAILROAD  SYSTEM. 

items  of  loss  as  well  as  of  profit ;  —  that  relating  to  railroads 
is  no  exception  to  this  rule.  It  has  been  noticed  that  the 
laws  which  limited  the  profit  on  capital  paid  into  railroad  con- 
struction made  no  provision  to  guarantee  any  profit  up  to 
that  limit.  In  regard  to  this  the  capitalist  took  his  risk.  He 
built  railroads  in  every  direction,  and  the  community  under- 
took to  say  to  him  that,  where  he  made  a  success  he  must 
content  himself  with  reasonable  profits ;  —  where  he  made  a 
failure  he  must  submit  to  a  total  loss.  Here,  then,  in  this 
absence  of  a  guarantee  of  reasonable  profit,  lay  the  real 
security  which  the  community  saw  fit  to  take  for  itself  against 
excessive  profit.  It  was  a  case  of  resort  had  to  the  doctrine  of 
averages.  That  it  was  no  meaningless  security  is  a  thing  very 
susceptible  of  proof ;  —  indeed,  it  is  not  too  much  to  say  that 
the  loss  incuiTed  by  private  capital  in  ill-considered  railroad 
enterprises, — the  mere  amounts  of  money  actually  paid  into 
construction,  and  since  wiped  out  of  existence  by  insolvency 
or  loss  of  interest,  —  it  is  safe  to  say  that  this  often  forgotten 
element  in  the  account  would  constitute  more  than  a  set  off 
for  the  largest  amount  of  watered  stock  ever  alleged  to  have 
been  issued.  People  continually  refer  to  the  brilliant  successes 
in  railroad  enterprises ;  —  they  do  not  so  often  count  the 
failures,  or  remember  the  fact  that  not  a  few  of  our  thorough- 
fares were  actually  given  by  capitalists  to  the  communities 
which  now  enjoy  them.  This  stjitement  is  very  susceptible  of 
proof.  The  profits  upon  railroad  enterprises,  as  a  whole,  are  not 
excessive,  —  the  business  is  one  which  affords  in  this  country 
even  less  than  the  average  return  upon  the  capital  invested  in 
it.  The  actual  cost  in  money,  up  to  the  present  time,  of  the 
55,000  miles  of  railroad  now  in  operatif)n  in  the  United  States 
cannot  have  been  less  than  $  40,000  per  mile,  or,  in  all,  twenty- 
two  hundred  millions  of  dollars,  and  was  probably  much  more. 
Perhaps  one  quarter  in  amount  of  the  cost  to  both  sides  of 
the  war  of  the  rebellion.  The  net  earnings  of  the  system,  — 
that  part  which  alone  represents  profit  on  capital, -7-  cannot  cer- 
tainly be  estimated  at  more  than  33  per  cent  of  the  gross 
earnings,  or  in  this  case  $  150,000,000  per  annum.     Here, 


STOCK- WATERING.  411 

then,  under  the  most  favorable  circumstances,  is  a  system  re- 
turning 6.82  per  cent  upon  the  capital  actually  invested  in  it. 
In  America  this  cannot  surely  be  considered  excessive ;  —  had 
the  State  governments  guaranteed  the  investments  the  money 
could  not  have  been  obtained  at  a  lower  rate. 

An  examination  of  the  system  in  detail  would  indicate  a 
similar  result.  In  Massachusetts,  the  net  earnings  average 
7.26  per  cent  on  the  construction  accounts  of  the  roads;  in 
New  York,  they  average  7.5  per  cent ;  but  in  Ohio  they  fall 
to  4.8  per  cent;  while  in  Pennsylvania  they  rise  to  8.3  per 
cent.  Such  facts  as  these  would  seem  to  indicate  many  and 
very  heavy  counterbalancing  losses.  Nor  are  such  difficult  to 
find.  Beginning  with  the  Grand  Trunk  in  Maine,  and  passing 
down  by  the  Vermont  Central  to  the  Boston,  Hartford  &  Erie 
in  Massachusetts,  and  thence  to  the  Erie  in  New  York,  and  the 
Philadelphia  &  Erie  in  Pennsylvania,  and  the  Atlantic  &  Great 
Western  in  Ohio,  and  so  on  by  the  Ohio  &  Mississippi  to  the 
North  Missouri,  it  is  not  difficult  to  enumerate  name  after 
name,  representing  thousands  of  miles  of  roads  and  hundreds 
of  millions  of  investment,  which  are  synonymous  only  with 
loss  and  insolvency,  or  at  best  with  hopes  long  deferred. 

It  is  in  this  way  that  a  certain  just,  though  rude  average  is 
evolved  out  of  a  conflict  of  shrewdness  and  simplicity,  ex- 
cessive cunning  and  unreasoned  action.  The  difficulty  with 
averages  is,  however,  an  obvious  one.  The  burden  is  necessa- 
rily to  be  placed  just  where  the  public  interest  demands  that 
it  should  not  be  placed.  A  thoroughfare  like  the  New  York 
Central  makes  good  the  deficiencies  of  a  number  of  local  enter- 
prises which  have  no  connection  with  it.  It  is  thus  on  the 
chief  arteries  that  the  greatest  obstruction  is  placed,  and  the 
transportation  tax  is  to  be  levied  indefinitely  wherever  it  can 
most  readily  be  found.  The  mere  fact  that  a  sort  of  aver- 
age is  educed  is  no  alleviation  of  particular  ills  complained  of. 
Each  road  is  consti'ucted  on  its  own  merits,  and  without  regard 
to  the  profit  or  loss  involved  in  the  operation  of  another  road 
perhaps  hundreds  of  miles  off".  That  the  through  routes  of 
the   country,  —  the    main   arteries  of   travel  and  commerce 


412  THE   RAILROAD   SYSTEM. 

should  "ultimately  be  as  nearly  as  possible  free,  is  of  the  great- 
est moment  to  the  whole  American  people  ;  that  they  should 
ever  become  so  under  a  system  which  causes  them  to  make 
good  the  deficiencies  of  an  entire  system,  is  to  the  last  degree 
improbable.  The  true  rule  would  seem  to  be,  that,  while  the 
owners  have  a  right  to  the  stipulated  return  on  the  cost  of 
their  whole  property,  whether  the  same  was  paid  in  by  them 
in  money  or  in  undivided  profits  within  the  limit  of  dividends, 
yet  that  beyond  this  the  community  ought  resolutely  to  insist 
that  every  increase  of  value  should  contribute  only  to  the 
freedom  of  intercourse. 

In  conclusion,  the  practical  remedy  of  the  abuse  of  stock- 
watering  in  its  most  objectionable  shape  would  after  all  seem 
to  be  both  obvious  and  easily  to  be  secured.  There  has  never 
been  in  America  any  recognized  imd  uniform  mode  of  keeping 
railroad  accounts.  The  want  of  this  has  opened  the  door  to 
all  the  evils,  not  fraudulent,  which  have  been  described.  A 
very  brief  statement  of  the  case  will  make  this  apparent. 
All  railroad  expenditures  are  incurred  either  on  accoiint  of 
the  construction  or  of  the  operation  of  roads.  Construction 
should  properly  represent  cash  paid  in  by  stockholders,  upon 
the  full  amount  of  which  they  have  a  right  to  receive  divi- 
dends, if  the  earnings  justify  their  payment ;  the  operation  of 
the  road,  on  the  other  hand,  is  to  be  fully  provided  for  out 
of  the  earnings,  and  it  is  only  the  balance  left  over  after  thus 
providing  for  it  which  can  be  devoted  to  the  payment  of 
dividends.  No  method  of  keeping  these  accounts  having  been 
prescribed  by  government,  as  a  consequence  no  two  corpora- 
tions have  kept  them  alike.  Certain  corporations  early  closed 
their  construction  accounts,  and  consequently  the  whole  cost 
of  developing  their  roads  was  afterwards  charged  to  operating 
expenses.  In  such  cases  the  community  simply  doubled  and 
trebled  its  railroad  facilities  out  of  an  excessive  trans])ortation 
tax.  In  other  words,  instead  of  paying  an  annual  interest  on 
aipital  invested  in  railroads,  it  pays  in  the  capital  itself,  thus 
gi-adually  accumulating  a  property  out  of  all  proportion  to  the 
evidences  of  value  which  represent  it  in  private  hands.     This 


STOCK- WATERING.  41o 

is  what  is  known  as  a  conservative  system  of  management. 
On  the  other  hand,  another  system  of  management  charges  all 
doubtful  amounts  to  consti'uction,  thus  perhaps  running  the 
company  in  debt,  but  at  the  same  time  reducing  operating 
expenses  to  a  minimum  and  nominally  leaving  heavy  net 
profits  to  furnish  dividends  to  the  stockholders.  The  result 
of  this  system  is  that  the  securities  of  a  road  rapidly  reach  an 
amount  which  more  than  represents  the  full  value  of  the 
property.  This  is  what  is  not  infrequently  known  as  a  pro- 
gressive or  enterprising  management.  In  each  extreme  the 
public  is  practically  defrauded. 

So  long  as  this  license  in  railroad  accounts  is  permitted  it  is 
impossible  for  any  community  to  do  more  than  guess  at  the 
real  amount  of  paid-in  capital  represented  by  its  railroad  sys- 
tem. On  the  one  hand  the  proceeds  of  the  transportation  tax 
are  habitually  perverted  to  the  work  of  construction  ;  and,, 
upon  the  other  hand,  the  private  capital  which  should  do  the 
work  of  construction  is  applied  to  the  payment  of  dividends. 
The  responsibility  of  fixing  the-  cost  of  their  thoroughfares  is 
thus  devolved  upon  the  private  corporations  which  own  them. 
That  such  a  power  should  be  abused  is  almost  inevitable  ;  that 
it  now  does  exist  and  always  has  existed  is  a  striking  evidence 
of  legislative  improvidence.  A  piiblic  and  uniform  system  of 
railroad  accounts,  kept  in  a  manner  specified  by  government,, 
and  audited  by  government  officials,  would  have  obviated 
much  of  the  difficulty  and  prevented  innumerable  frauds. 
Finally,  a  responsible  department  of  the  executive  should 
have  charge  of  the  subject  and  should  be  empowered  to  decide 
as  to  the  amounts  of  private  capital,  directly  or  indirectly 
paid  into  construction,  and  authorize  the  issue  of  securities 
accordingly. 


414  THE   RAILROAD   SYSTEM. 

CHAPTER  V. 

THE   GOVERNMENT    AND   THE   RAILROAD    CORPORATIONS. 

IF  neither  competition  nor  legislation  have  proved  them- 
selves eflPective  agents  for  the  regulation  of  the  railroad 
system  what  other  and  more  eftcctive  one  is  there  within  the 
reach  of  the  American  people  1  This  is  the  final  issue  to 
which  the  railroad  problem  mnst  apparently  reduce  itself. 
The  material  and  moral  difficulties  which  surround  the  ques- 
tion are  further  complicated  by  grave  political  considerations, 
which  need  now  to  be  stated  with  all  possible  emphasis,  foi- 
they  will  continually  present  themselves  throughout  what 
remains  of  this  discussion,  and  must  ever  be  borne  in  mind. 
The  difficulty  in  great  degree  arises  from  the  development  of 
a  material  and  moral  power,  or  rather,  perhaps,  combination 
of  powers,  in  our  social  organism  which  our  political  system 
was  not  calculated  to  deal  with.  At  the  time  the  framework 
of  our  government  was  put  together,  a  system  of  necessary 
monopolies  was  the  very  last  thing  which  was  expected  to  pre- 
sent itself  on  this  continent.  Our  governments,  state  and 
national,  grew  up  among,  and  were  calculated  for,  a  commu- 
nity in  the  less  complex  stages  of  civilization.  Our  whole 
machinery  looked  to  dealing  with  individuals,  and  that  only  in 
the  least  degree  which  deserved  the  name  of  government  at 
all.  The  idea  of  one  man  or  sot  of  men  combining  to  own 
in  absolute  monopoly  the  great  channels  of  internal  commu- 
nication as  they  then  existed,  —  the  Hudson,  or  the  Ohio,  or 
the  great  lakes, —  would  have  been  regarded  .as  a  wholly  inad- 
missible supposition,  a  contingency  impossible  to  occur.  Con- 
sequently no  machinery  was  devised  calculated  to  meet  such 
an  im[)robablo  emergency.  Yet  that  very  emergency  would 
now  seem  to  be  imminent.  Here  then  are  two  systems  gi-ow- 
ing  and  expanding  side  by  side,  —  the  representative,  repub- 
lican system  of  government,  adapted  to  a  simple  and  some- 


THE  GOVERNMENT  AND  THE  RAILROAD  CORPORATIONS.  415 

what  undeveloped  phase  of  society ;  and  the  corporate  in- 
dustrial sj'stem,  the  result  and  concomitant  of  a  complex  and 
artificial  civilization.  How  long  can  they  develop  together  1 
The  peculiarities  and  combinations  now  noticed  in  our  legis- 
latures and  market-places,  the  growing  torpidity  of  public 
opinion,  the  constant  strain  under  which  our  machinery  of 
government  visibly  works,  the  crude,  undigested  propositions 
for  reform  which  emanate  from  every  quarter,  the  startling 
rapidity  with  which  change  develops  itself,  and  the  rapidly 
shifting  phases  which  all  interests  assume,  clearly  indicate 
some  deep-seated  social  and  political  revolution  in  progress. 
What  this  will  result  in,  time  only  can  disclose.  It  would 
be  a  mere  waste  of  space  and  ir^genuity  to  endeavor  to  fore- 
cast it  at  present. 

Meanwhile  so  far  as  the  railroad  system  is  concerned  it 
seems  almost  inevitable  that  the  national  government  must, 
soon  or  late,  and  in  a  greater  or  less  degree,  assume  a  jurisdic- 
tion. This  is  an  obvious  conclusion  to  be  deduced  from  the 
irresistible  development  of  the  system  in  a  course  it  has  hith- 
erto pursued.  The  next  question  is  when,  and  in  what  way, 
and  to  what  extent,  is  this  to  be  done  1  What  is  to  be  the 
basis  of  legislation  1  This  now  admits  of  almost  infinite  modi- 
fication, ranging  from  public  ownership  on  the  one  hand,  to 
the  most  limited  regulation  on  the  other.  The  same  may  be 
said  as  to  extent  of  jurisdiction.  It  may  be  assumed  over  all 
roads  lying  in  more  than  one  State,  or  it  may  be  confined  to 
certain  trunk  lines  specially  designated  as  military  and  post 
roads.  These  questions  it  is  now  premature  to  discuss.  They 
constitute  the  final  problem.  All  other  proposed  solutions  of 
it,  resting  upon  State  regulation  or  State  control,  are  but 
temporizing  expedients,  important  simply  as  illustrating  the 
practical  value  of  certain  theories.  Such  may  prove  instruc- 
tive restu)g-plaoes ,  they  can  liardly  be  the  final  objective.  To 
these,  however,  attention  should  now  be  confined,  for  through 
them  the  ultimate  results  are  to  be  evolved. 

Two  of  these  proposed  solutions  have  of  late  excited  an  un- 
usual degree  of  discussion.     The  one  seeks  to  supply  our  gov- 


416  THE   RAILROAD   SYSTEM. 

eminent  with  a  supplementary  power,  which  will  better  adapt 
it  to  the  new  exigency  which  it  is  called  upon  to  meet ;  —  the 
other  directly  meets  the  emergency  with  a  proposal  of  some 
fonn  of  ownership  of  railroads  by  the  State ;  it  pronounces  the 
English  and  American  railroad  system  in  many  respects  a 
failure,  and  seeks  to  make  good  its  defects  by  the  introduction 
into  it  of  certain  features  of  the  Belgian  system. 

It  is  impossible,  in  view  of  past  experience,  not  to  entertain 
grave  doubts  as  to  the  result  of  any  experiment  of  the  sort  last 
referred  to,  made  through  the  political  machinery  which  exists 
in  America.  As  regards  the  construction  of  a  railroad  system 
it  has  repeatedly  been  tried  and  uniformly  ended  in  failure. 
Pennsylvania,  Ohio,  Michigan,  Illinois,  and  many  other  States 
went  through  the  same  sad  experience.  Every  section  with  us 
had  its  claims,  and  those  claims  could  not  be  disregarded. 
In  Belgium,  in  France,  or  in  Russia  a  government  engineer 
can  locate  a  railway,  and  there  an  end ;  it  was  found  to  be 
otherwise  in  America,  and  an  impartial  disregard  of  the  figures 
of  the  census  by  no  nieans  resulted  in  a  commercial  success. 
It  is,  however,  argued  that  it  would  be  otherwise  in  the  case 
of  a  completed  system ;  that  if  our  State  governments  could 
not  construct,  they  could  at  least  manage  railroads  by  deputy. 
This  remains  to  be  seen.  That  the  government  should  engage 
in  any  business,  whether  as  producers,  as  carriers,  as  bankers, 
or  as  manufacturers,  is  opposed  to  the  whole  theory  of  strictly 
limited  governmental  functions. 

This  aspect  of  the  question  is  most  important,  and  in  Amer- 
ica it  cannot  well  be  dwelt  upon  too  frequently  or  stated  too 
broadly.  Our  whole  political  organization,  our  history  as  a 
nation,  the  prodigious  material  development  of  which  wo  are 
so  vain,  —  all  of  these  rest  upon  the  great  principle  of  limited 
governmental  functions,  and  tlie  leaving  of  persons  and  interests 
to  rely  solely  on  themselves,  and  to  work  out  their  own  destiny 
in  their  own  way,  subject  to  the  least  possible  external  inter- 
ference. To  turn  over  to  a  government  constructed  on  such 
a  principle  the  management  of  so  complex  an  organization  as 
the  railroad  system  is  certainly  a  measure  of  the  last  resort 


THE  GOVERNMENT  AND  THE  RAILROAD  CORPORATIONS.  417 

But,  unfortunately,  this  is  a  case  in  which  choice  must  be 
made  between  two  evils.  So  far  from  disentangling  themselves 
from  connection  with  the  railroad  system,  there  is  not  to-day 
a  government  in  the  United  States,  including  the  national 
government  itself,  which  is  not  steadily  drifting  into  the  most 
dangerous  form  of  connection  with  it  of  which  it  is  possible 
to  conceive.  It  is  scarcely  an  exaggeration  to  say  that  our 
legislatures  arc  now  universally  becoming  a  species  of  irreg- 
ular boards  of  railroad  direction.  Questions  of  the  purest 
detail  affecting  the  operation  of  railroads  are  regularly  brought 
before  them,  and  the  increasing  disposition  to  manage  this 
elaborate  system  by  statute  enactment  is  notorious.  Not  only 
is  it  more  than  questionable  whether  this  can  be  successfully 
done,  but  the  attempt  itself  irresistibly  forces  the  owners  of 
the  system  in  self-defpnce  into  the  lobby.  The  inevitable  con- 
sequence does  not  need  to  be  dwelt  upon ;  it  has  already  be- 
come a  fruitful  source  of  scandal  and  alarm.  The  question  at 
issue,  therefore,  is  not  between  interference  and  non-interfer- 
ence by  the  State,  but  between  two  forms  of  interference. 

For,  indeed,  it  is  practically  conceded  on  all  sides  that  the 
task  of  supervising  in  some  way  the  railroads  of  a  modern 
State  does  constitute  one  of  the  necessary  functions  of  gov- 
ernment. A  writer  as  jealous  of  limiting  those  functions  as 
J.  S.  Mill  expressly  makes  this  exception  :  "  There  are  many 
cases  in  which  the  agency,  of  whatever  natiu*e,  by  which  a 
service  is  performed,  is  certain  from  the  nature  of  the  case,  to 
be  virtually  single,  in  which  a  practical  monopoly,  with  all  the 
power  it  confers  of  taxing  the  community,  cannot  be  prevented 
from  existing  ...  it  is  the  part  of  government  either  to  sub- 
ject this  service  to  reasonable  conditions  for  the  general  sid- 
vantage,  or  to  retain  such  power  over  it,  that  the  profits  of 
the  monopoly  may  at  least  be  obtained  for  the  public.  This 
applies  to  the  case  of  a  road,  a  canal,  or  a  railway.  These  are 
always  in  a  great  degree  practical  monopolies ;  and  a  govern- 
ment which  concedes  such  monopolies  unreservedly  to  a  private 
company,  does  much  the  same  thing  as  if  it  allowed  an  indi- 
vidual or  an  association  to  levy  any  tax  they  chose,  for  their 


418  THE   RAILEOAD   SYSTEM. 

own  benefit,  on  all  the  malt  produced  in  the  country,  or  on  all 
the  coffee  imported  into  it."  Accepting  this  statement  of  the 
case  as  sonnd,  and  it  is  difficult  to  see  how  it  can  be  contro- 
verted, it  simply  remains  to  consider  what  form  of  interference 
will  be  most  effective,  and  at  the  same  time  in  the  least  degree 
politically  injurious.     At.  this  point  opinions  diverge. 

The  results  of  legislative  regulation  of  private  railroad  cor- 
porations have  been  sufficiently  dwelt  upon.  It  can  hardly  bo 
claimed  that  in  any  aspect  they  have  been  encouraging.  Not 
only  have  the  material  interests  of  the  community  suffered, 
but  the  effects  upon  political  morality  have  been  injurious, 
and  are  felt  at  the  most  vital  point  of  our  system,  —  in  the 
legislative  department,  A  vicious  civil  service  or  an  inefficient 
executive  can  be  reformed,  but  there  is  no  power  which  can 
purify  a  corrupted  legislature.  Many  States  in  this  country, 
and  especially  New  York,  New  Jersey,  Pennsylvania,  and 
Maryland  have  now  for  years  notoriously  been  controlled  by 
their  railroad  corporations.  Not  one  of  these  States  owns  a 
mile  of  railroad,  and  yet  it  is  very  difficult  to  conceive  of  any 
form  of  State  ownership  which  would  entail  greater  scandals 
or  political  evils  than  those  which  now  spring  from  the  system 
in  use  in  them.  The  empty  name  of  non-interference  is  thus 
jealously  guarded,  whilo  constant  interference  notoi'iously  con- 
stitutes one  half  of  the  legislative  business  of  the  country. 

The  expediency  of  making  an  experiment  at  the  State 
ownership  of  a  railway  and  its  management  throiigh  the 
agency  of  public  trustees,  instead  of  a  board  of  private  di- 
rectors, has  been  more  or  less  discussed  (hiriug  each  of  the 
last  three  sessions  of  the  Massachusetts  legislature.  A  fair 
though  carefully  limited  trial  of  the  Belgian  system  was  prt> 
posed  by  the  Board  of  Raihoad  Commissioners  of  the  State 
in  their  report  for  1871.  They  advocated  the  purchase  by  the 
Commonwealth  of  the  fifty  miles  of  road  between  Boston 
and  Fitchburg,  which  will  ultimately  connect  with  the  West 
by  means  of  the  Hoosac  Tunnel.  The  argument  of  the  Com 
missioners  practically  was,  that  competition,  if  it  could  be 
secured,  was,  under  the  {)roscut  circumstances,  the  most  effec- 


THE  GOVERNMENT  AND  THE  RAILROAD  CORPORATIONS.   419 

tive  agent  which  could  be  brought  to  bear  to  introduce  many 
greatly  needed  reforms  into  the  Massachusetts  railway  system. 
To  efl'cct  these  reforms  by  means  of  legislation  in  the  case  of 
roads  owned  and  managed  by  private  companies,  even  if  it 
were  practicable,  would  in  fact  occasion  a  far  more  dangerous 
and  coiTupting  political  association  between  the  private  com- 
panies and  the  government,  than  the  absolute  ownership  of 
any  experimental  line.  Such  a  line  once  in  the  hands  of 
trustees,  and  energetically  managed,  would  obviate  all  necessity 
of  further  attempts  at  the  most  difficult  class  of  railroad  legis- 
lation by  effecting  that  through  the  force  of  competition, 
which  it  was  now  in  vain  sought  to  compel  by  law.  The  com- 
petition and  comparison  continually  existing  between  the  pub- 
lic and  private  lines  could  be  relied  upon  to  keep  the  adminis- 
tration of  each  pure  ;  neither,  it  was  argued,  would  the  State 
in  this  way  be  gradually  led  on  to  assume  the  other  railroads 
within  its  limits.  If  public  management  failed  to  operate  the 
one  road  assumed  so  as  to  compete  with  private  roads,  and  in 
addition  thereto  to  pay  the  interest  on  its  purchase  money,  — 
equal  to  tl»e  dividends  on  private  roads,  —  then  other  por- 
tions of  the  State  would  insist  iipon  the  sale  of  the  property 
rather  than  pay  taxes  to  support  a  local  public  road  ;  did  pub- 
lic management  succeed  in  its  reforms  and  still  meet  all  de- 
mands on  accoimt  of  interest,  then  private  managements 
woidd,  imder  the  pressure  of  public  opinion,  naturally  adopt 
reforms  thus  proved  to  be  safe ;  they  would  follow  in  tho 
beaten  track. 

The  only  cases  furnished  by  American  experience  at  all 
parallel  to  the  one  here  proposed,  certainly  do  not  militate 
against  this  line  of  argument.  Most  prominent  is  that  of  the 
Erie  Canal  in  New  York.  The  influence  of  this  canal  as  an 
independent  and  steady  competing  force  upon  railroads  is 
well  known  ;  —  it,  and  it  only,  can  be  relied  upon  never  to 
enter  either  into  freight  combinations  or  ruinous  competition. 
It  has  been  public  property,  and  its  management  certainly  has 
not  been  above  criticism,  but  it  is  equally  indisputable  that  it 
has  never  exercised  upon  the  politics  of  New  York  an  influence 


420  THE   RAILROAD   SYSTEM. 

either  so  great  or  so  pernicious  as  at  least  two  of  the  "pri- 
vate railroad  corporations  with  which  it  competes.  So  far  as 
administration  is  concerned,  the  precedent  of  the  Erie  Canal 
wholly  fails.  The  service  in  the  case  of  a  canal  and  a  railroad 
being  dissimilar,  the  element  of  comparison  between  the  pub- 
lic and  the  private  roads  which  has  produced  such  great  re- 
sults in  Belgium  is  wanting.  One  thing,  however,  is  very  cer- 
tain, and  not  less  suggestive  as  bearing  on  one  present  phase 
of  the  railroiid  problem,  were  the  canal  a  public  railway,  in- 
stead of  w'hat  it  is,  Mr.  Vanderbilt  might  safely  be  permitted 
to  water  the  stock  of  the  Central  to  any  degree  which  he 
might  desire ;  —  the  community  could  always  control  the 
tariff  of  his  road  without  being  compelled  to  resort  to  hostile 
legislation.  Neither  would  the  influence  of  this  competition 
probably  be  confined  to  the  Central  road.  Railroad  manage- 
ment in  the  same  community  always  seeks  a  certain  level ; 
reforms  once  introduced  are  never  confined  to  their  original 
limits.  Let  a  positive  advance  in  any  direction  be  thoroughly 
established,  and  the  pressure  of  self  interest  and  popular  feel- 
ing may  safely  be  relied  upon  to  make  it  general. 

The  Post-Office  Department  of  the  United  States  govern- 
ment also  throws  some  light  through  its  workings  upon  the 
proposed  innovation.  The  postal  service  is  a  close  monopoly, 
employing  thousands  of  agents  and  entailing  heavy  expendi- 
tures ;  —  it  has  for  a  long  time  been  subjected  to  all  the  evils 
which  flow  from  a  system  of  rotation  in  office,  —  it  is  a  recog- 
nized part  cf  the  political  spoils  of  the  country.  While,  in 
spite  of  these  adverse  circumstances,  its  administration  will 
probably  compare  favorably  with  that  of  any  railroad  in  the 
country,  and  while  it  furnishes  facilities  and  accommodates  the 
public  as  no  private  corporation  possibly  could  do,  yet  no 
one  will  mantain  that  the  Post-Office  in  its  connection  with 
the  government  is  politically  either  as  disturbing  or  as  cor- 
rupting an  agent  as  any  one  of  numerous  mil  road  corporations 
which  are  perpetually  soliciting  Congress. 

Should  this  experiment  be  tried  and  succeed  it  might  well 
give  a  new  phase  to  the  whole  question  uf  internal  communi- 


THE  GOVERNMENT  AND  THE  RAH.ROAI)  CORPORATIONS.  421 

cation,  and  bring  the  railroad  problem  one  step  nearer  to  a 
solution.  Meanwhile,  it  would  be  wholly  futile  to  suppose  in 
the  face  of  the  growing  tendency  to  nationality,  the  constant- 
ly increasing  disposition  to  ignore  State  lines  and  to  transfer 
control  to  the  general  government,  that  this  revolution  would 
confine  itself  to  State  limits,  or  that  a  dozen  different  State 
organizations  could  control  a  Pacific  railway.  Such  a  system, 
with  local  jealousies,  interests,  and  pride  to  contend  with,  — 
each  great  line  running  the  gauntlet  of  a  dozen  rival  competing 
points,  and  artificially  turned  into  twenty  interested  channels, 
— would  so  hamper  the  commerce  of  the  continent  that  it  would 
crumble  into  chaos  in  'less  than  a  twelvemonth.  Government 
ownership  of  railroads  can  therefore  with  us  only  mean  their 
ultimate,  though  not  necessarily  exclusive,  ownership  by  the 
national  government.  At  present,  however,  that  government 
is  peculiarly  luifitted  to  assume  any  functions  of  this  sort, 
and  must  continue  to  be  so  until  after  a  thorough  and  sweep- 
ing reform  of  the  civil  service  is  effected.  A  purified  political 
atmosphere  may  be  imagined,  in  which  at  some  future  time  it 
would  be  safe  for  Congress  to  assume  the  management,  through 
supervising  boards,  of  certain  designated  continental  routes ; 
but  any  movement  in  that  direction  would  certainly,  and  veiy 
properly,  encounter  a  strong  and  determined  opposition  so 
long  as  the  pi'csent  condition  of  affairs  exists. 

It  is  not  wholly  impossible,  however,  that  a  safer,  even  if  less 
effective,  solution  of  the  difficulty  may  be  found  in  the  furnish- 
ing our  governments  with  the  supplementary  power  which 
shall  adapt  them  to  the  new  condition  of  affairs  which  has 
arisen.  A  practical  attempt  in  this  direction  is  now  in  process 
of  development  in  Illinois.  That  State  was  the  first  to  recognize 
the  essential  fact  that  the  railroad  system  is  an  exceptional 
interest,  and  therefore  requires  to  be  exceptionally  dealt  with. 
This  great  stride  in  advance  was  secured  by  the  Constitution 
of  1870.  It  was  the  concession  of  a  starting-point,  the  recog- 
nition of  the  new  social  and  political  force  for  which  no  pro- 
vision had  been  made.  When  a  deficiency  is  fairly  acknowl- 
edged, we  can  in  America  feel  a  tolerable  confidence  that  it 


422  THE   RAILROAD   SYSTEM. 

will  shortly  be  supplied.  The  provisions  introduced  into  the 
Illinois  Constitution  are,  indeed,  crude  and  unsatisfactory,  but 
they  are  a  beginning.  A  discussion  of  these  provisions  will 
again  bring  into  view  at  once  the  very  point  upon  which  our 
State  systems  have  hitherto  broken  down  in  their  attempts  to 
deal  with  the  railroad  development. 

The  most  striking  feature  of  the  Illinois  Constitution  is  the 
strong  resolve  of  its  framei's  to  do  away  with  what  are  known 
in  England  as  "  private  bills,"  and  in  this  country  as  special 
legislation.  It  is  unnecessary  to  dilate  upon  the  nature  of 
this  abuse,  which  may  safely  be  set  down  as  the  greatest  dan- 
ger to  which  any  system  of  government  is  liable ;  it  may 
almost  be  said  to  be  the  root  of  all  political  ills.  Legislation 
should  know  nothing  of  individuals.  All  modern  thought 
tends  to  the  conclusion  that  the  universe  is  controlled  by  gen- 
eral laws ;  and  a  belief  in  special  providences  is  entertained 
only  by  the  most  superstitious.  A  sound  system  of  govern- 
ment should  recognize  individuals  no  more  than  the  laws  of 
nature  recognize  them.  The  law  should  apply  to  all,  without 
discrimination  for  or  against.  The  system  of  special  legisla- 
tion, on  the  contrary,  from  top  to  bottom,  is  based  on  a  sup- 
posed necessity,  which  is  taken  for  granted  as  existing,  that 
privileges  may  be  conceded  to  one  or  a  few  which  it  is  not  safe 
or  politic  to  concede  to  all.  Nature  never  acts  in  this  way, 
nor  will  thoi'ouglily  enlightened  govenunents  do  so,  when  any 
such  exist.  The  Illinois  Constitution  deserves  to  be  liailed  as 
a  great  advance  towards  the  realization  of  this  idea.  The 
framers  of  this  instnmient,  when  they  came  to  dealing  with 
railways,  provided  for  their  regulation  these  articles,  among 
others :  — 

Article  XI. 

CORPORATIONS. 

§  I.  "No  corporation  shall  bo  created  by  special  laws,  or  its  char- 
ter extended,  changed,  or  amciuU-d ;  .  .  .  but  the  General  Assembly 
shall  j)rovi(le,  by  <,'cncral  laws,  for  the  organization  of  all  corpora- 
tion.s  hereafter  to  be  created." 

§  11.  "No  railroad  corporation  shall  consolidate  its  stock,  prnp- 


THE  GOVERNMENT  AND  THE  RAILROAD  CORPORATIONS.  423 

erty,  or  franchises  with  any  other  raihoad*  corporation  owning  a 
parallel  or  competing  line " 

§  12.  "  Railways  heretofore  constructed,  or  that  may  hereafter  be 
constructed,  in  this  State,  are  hereby  declared  public  highways,  and 
shall  be  free  to  all  persons  for  the  transportation  of  their  property 
thereon,  under  such  regulations  as  may  be  prescribed  by  law.  And 
the  General  Assembly  shall,  from  time  to  time,  pass  laws  establishing 
reasonable  maximum  rates  of  charges  for  the  transportation  of  pas- 
sengers and  freight  on  the  different  railroads  in  this  State." 

§  13.  "  No  railroad  corporation  shall  issue  any  stock  or  bonds, 
except  for  money,  labor,  or  property,  actually  received  and  applied 
to  the  purposes  for  which  such  corporation  was  created;  and  all 
stock  dividends  and  other  fictitious  increase  of  the  capital  stock  or 
indebtedness  of  any  such  corporation  shall  be  void " 

§  15.  "  The  General  Assembly  shall  pass  laws  to  correct  abuses, 
and  prevent  unjust  discrimination  and  extortion  in  the  rates  of 
freight  and  passenger  tariffs  on  the  different  railroads  in  this  State, 
and  enforce  such  laws  by  adequate  penalties,  to  the  extent,  if  neces- 
sary for  that  purpose,  of  forfeiture  of  their  property  and  franchises." 

Now  while  it  is  conceded  that  special  legislation  is  the 
bane  of  all  government,  it  must  also  be  conceded  that  special 
legislation  has  hitherto  been  found  indispensable  to  any  regu- 
lation of  the  railroad  system.  The  exception  once  conceded, 
every  railroad  came  np  and  demanded  it  own  special  immuni- 
ties and  privileges,  —  its  peculiar  charter,  which  was  a  law 
imto  itself.  The  extent  to  which  this  was  carried  may  be  in- 
ferred from  the  three  thousand  two  hundred  acts  on  the 
statute-book  of  Great  Britain,  and  the  one  thousand  on  that 
of  Massachusetts,  — nine-tenths  of  them,  in  each  case,  special 
legislation  to  meet  the  supposed  requirements  of  an  organized 
monopoly.  The  exception  and  its  dangerous  nature  —  the 
frauds  which  were  perpetrated  imder  it,  and  the  lax  and  con- 
fused system  of  legislation  it  was  engendering  —  long  ago 
attracted  the  public  attention  and  excited  its  alarm.  The 
press  raised  its  voice,  and  the  people  responded  by  inserting 
into  more  than  one  constitution  provisions  absolutely  inhibit- 
ing the  passage  of  any  act  of  a  private  nature.  In  other  States 
the  Executive  accepted  the  issue  ;  and  in  New  York  a  long 


424  THE  RAILROAD   SYSTEM. 

succession  of  vetoes  has  only  recently  vindicated  the  principle 
of  general  legislation.  There  was  in  each  of  these  eftbrts  at 
reform  an  element  of  fatal  weakness.  The  fact  that  the  rail- 
road system  occupied  an  exceptional  position  was  ignored. 
Instead  of  conceding  that  this  system  was  made  up  of  a  num- 
ber of  monopolies,  in  regard  to  the  necessities  of  which  a  dis- 
cretion must  be  exercised,  journalists  and  legislators  insisted 
on  placing  them  in  a  position  exactly  similar  to  that  of  in- 
dividuals, amenable  to  every  law  of  trade.  The  result  was, 
of  course,  failure.  The  monopolies  evaded  or  broke  down  the 
law,  and  were  omnipresent  in  legislatures.  There  was  no 
machinery  in  the  government  adapted  to  meeting  the  excep- 
tional case.  Reformers  failed  to  realize  that,  though  special 
legislation  was  corrupting  the  whole  political  system,  yet 
general  legislation  of  the  ordinary  description  would  not  meet 
the  requirements  of  the  case.  It  is  here  that  the  whole  ques- 
tion lies  in  a  nutshell,  —  how  can  the  requirements  of  the 
railroad  system  be  met,  and  yet  its  individual  members  driven 
from  the  legislature  1 

This  final  result  was  not  attained  in  the  Illinois  Constitu- 
tion ;  had  it  been,  the  value  of  that  instrument  would  have 
been  more  than  doubled.  Indeed,  the  provision  made  in  it 
brings  the  innovator  just  to  the  Mai  point ;  as  yet  he  has 
done  nothing,  but  the  next  step  involves  everything.  In  spite 
of  its  Constitution,  Illinois  must  now  slip  back  intt)  the  deep 
mire  of  special  railroad  legislation,  or  it  must  go  on  and  solve 
the  problem.  The  case  stands  thus  :  the  Constitution  implies 
the  passage  of  (1)  laws  prescriliing  reasonable  rates  of  charges 
on  the  different  railroads,  and  (2)  laws  to  correct  abuses  and 
prevent  unjust  discrimination  and  extortion  in  the  rates  of 
freight  and  passenger  tariff. 

The  legislature  it  seems  is  to  do  this  work ;  if  so,  the  work 
cannot  bo  done  ;  the  provisicjn  is  so  much  waste  paper.  It 
may  boldly  be  laid  down  as  a  principle,  that  no  general  law 
can  be  framed  which  will  meet  the  exigencies  of  a  whole  rail- 
road system  in  all  its  manifold  details.  This  is  true  in  almost 
every  respect.     A  law,  for  instance,  authorizes  the  taking  of 


THE  GOVERNMENT  AND  THE  RAILROAD  CORPORATIONS.  425 

land  for  railroad  purposes,  but  one  road  requires  an  excep- 
tional amount  of  land  in  a  particular  locality.  A  general  law 
regulates  station  facilities ;  but  while  it  may  apply  well  to  one 
district,  it  will  be  simply  ridiciilous  in  its  application  to 
another.  The  difficulties  in  the  way  of  framing  a  general  law 
regulating  fairs  and  freights,  —  the  very  one  provided  for  in 
the  Illinois  Constitution,  have  already  been  sufficiently  dis- 
cussed. If,  turning  from  this  manifest  difficulty,  the  legishx- 
ture  seeks  to  establish  tariffs  adapted  to  particular  roads,  then 
the  whole  evil  of  special  legislation  in  its  worst  possible  form 
is  upon  it.     Where,  then,  is  the  escape  1 

We  have  thus  got  back  to  the  old  puzzle,  —  how  to  meet 
special  requirements  under  general  laws.  The  solution,  if 
found  at  all,  —  if  failure  is  not  predestined,  —  will  be  found 
by  the  Illinois  legislature  in  fairly  recognizhig  an  evident  ex- 
ception to  general  conditions,  and  supplying  an  executory  power 
specially  calculated  to  meet  it.  It  is  the  want  of  this  which 
has  brought  to  nought  all  efforts  at  general  legislation  on  this 
subject  up  to  this  time.  They  have  uniformly  failed  from  one 
defect ;  they  were  hard,  unyielding,  intended  to  apply  to  dif- 
ferently conditioned  members  of  one  exceptional  and  most  com- 
plex system,  and  yet  wholly  unprovided  with  any  discretionary, 
adaptive,  or  executory  power.  The  law  was  there,  but  it  did 
not  move.  It  was  as  if  a  criminal  law  were  put  upon  the 
statute-book  which  was  to  apply  to  all  degrees  of  crime  indis- 
criminately, without  the  aid  of  judge  or  of  officer.  And,  in- 
deed, this  very  example  illustrates  the  whole  subject.  The 
criminal  law  was  once  a  subject  of  special  legislation.  Indi- 
vidual criminals  had  acts  passed  to  meet  their  paiticular 
cases.  The  legislature  was  at  one  and  the  same  time  judge 
and  jury.  The  legislative  and  judicial  functions  of  govern- 
ment were,  however,  separated  so  long  ago,  that  the  com- 
munity has  forgotten  that  they  were  ever  united ;  yet  it 
was  this  division,  first  introduced  irnder  Alfred  the  Great, 
which  alone  made  possible  the  success  of  parliamentary  gov- 
ernment. Had  it  been  the  discovery  of  one  man,  he  who 
made  it  would  have  deserved  to  rank   among   the   greatest 


426  THE   RAILROAD   SYSTEM. 

benefactors  of  his  kind.  In  early  ]Sew  England  history  the 
distinction  was  again-  obliterated.  The  Great  and  General 
o'ourt  w{\s  in  Massachusetts  Bay  both  the  source  of  law  and 
the  seat  of  supreme  justice.  This  simplicity  verj  shortly  dis 
appeared  as  society  became  more  complex,  but  it  left  behind  it 
the  fatal  legacy  of  special  legislation.  The  same  confusion  of 
functions  is  exactly  what  has  hitherto  existed  in  regard  to  rail- 
roads ;  the  result,  both  in  New  and  Old  England,  is  seen  in  a 
statute-book  swollen  with  special  enactments,  a  legislature 
overwhelmed  with  business  it  cannot  do  and  tainted  with 
jobbery  of  which  it  cannot  rid  itself,  all  resulting  in  a  rail- 
road system  which  is  a  confessed  faihu-e  in  everything  but  its 
material  aspect,  with  which  the  legislature  could  have  nothing 
to  do.     Can  the  desired  separation  be  effected  1 

The  solution  of  the  problem  stated  in  this  form  seems  so 
obvious,  that  it  is  fairly  matter  of  surprise  that  it  has  never 
5'et  been  practically  attempted.  The  legislature  should  enact 
its  general  laws  for  the  requirements  of  railroads,  as  it  does 
to  meet  the  innumerable  civil  and  criminal  complications  which 
arise ;  but,  in  the  one  case  as  in  the  other,  the  judicial  and 
discretionary  action  luuler  the  general  law  shoidd  be  devolved 
upon  tribunals  specially  created  to  take  cognizance  of  them. 
The  legislature  declares  the  rule  which  is  the  same  to  all; 
but  the  degrees  of  discretion  which  varying  circumstances  ex- 
act in  the  application  of  the  rule  must  constitute  a  trust  neces- 
sarily delegated  to  others.  At  present  all  these  distinct  jx)wers 
are  jealously  retained  by  the  legislatures.  Their  committees 
sit  as  coui'ts  and  take  evidence  and  listen  to  arguments.  So 
far  it  is  well.  At  this  point,  liowever,  instead  of  fi-aming  a 
general  law  or  dismissing  the  individual  case,  they  undertake 
to  give  a  charter  to  this  applicant  and  to  refuse  it  to  that ;  to 
pass  a  8j)ecial  act  in  favor  ot  this  corporation,  and  to  reject  it 
as  regards  that ;  to  authorize  an  increase  of  stock  here,  and  to 
direct  the  construction  of  a  new  depot  there.  These  are 'func- 
tions which  no  legislative  body  can  successfully  perform  ;  as 
well  undcM-take  to  decide  every  suit  at  law  or  to  affix  the  pen- 
alty to  every  crime.     Just  so  long  as  legislatures  insist  on 


THE  GOVERNMENT  AND  THE  RAILROAD  CORPORATIONS  427 

themselves  doing  work  of  this  nature,  just  so  long  will  coiTup- 
tion  increase  and  the  statute-book  fall  into  confusion. 

But  it  will  bo  said,  Who  will  guard  the  virtue  of  the  tri- 
bxinal?  Why  should  the  corporations  not  deal  with  them  as 
with  the  legislatures  1  They  may  do  so,  but  somewhere  and 
at  some  point,  put  on  all  the  checks  and  balances  that  human 
nigenuity  can  devise,  we  must  come  back  and  rely  on  human 
honesty  at  last.  One  rule  always  holds  good,  —  where  the 
most  direct  responsibility  exists,  there  will  the  best  conduct 
be  found.  Corruption  loves  a  throng  and  shrinks  from  iso- 
lated places.  To  divide  responsibility  is  to  destroy  it.  The 
judges  of  our  courts  are  rarely  otherwise  than  pure ;  the 
heads  of  our  official  departments  are  conspicuous  for  honesty  ; 
they  are  always  directly  and  individually  responsible.  If  we 
thus  can,  and  indeed,  from  the  necessity  of  the  case,  must 
confide  the  charge  of  the  public  funds  and  our  personal  liber- 
ties to  mortals  like  ourselves,  acting  under  the  law,  it  is  diffi- 
cult tc  see  why,  except  that  we  never  have  done  so,  we  cannot 
trust  these  other  interests  to  similar  mortals.  All  in  such 
cases  depends  upon  the  men.  We  have  had  in  England  and  in 
this  country  a  sufficiency  of  feeble  attempts  in  this  direction  — 
boards  of  trade,  railroad  commissions,  and  various  other 
pieces  of  machinery.  They  have  all  failed,  for  one  reason,  -  — 
the  principle  of  special  legislation  was  ever  kept  open  in  the 
background  behind  them.  They  have  uniformly  possessed  a 
mere  simulacrum  of  power ;  their  decisions  were  appealed 
from,  their  recommendations  were  ignored,  and  their  principal 
duty  was  to  sit  patiently  by  and  watch  the  corporations  as 
they  dealt  directly  with  the  legislature  over  their  heads. 
Instead  of  the  legislature  saying  to  the  sturdy  corporation 
beggars  who  infested  the  lobby,  as  it  would  say  to  civil  liti- 
gants or  to  criminals,  "  Leave  us  !  there  is  the  general  law 
and  there  is  a  tribunal  specially  charged  with  the  interests  of 
you  monopolists  ;  go  to  it  !  "  —  instead  of  this,  the  boards, 
commissums,  and  what  not,  have  ever  been  placed  m  the  ig- 
nominious ])Osition  of  a  court,  whether  civil  or  criminal,  from 
which  In  every  case  an  appeal  would  lie  to  the  legislature  it- 


428  THE   RAILROAD    SYSTEM. 

self.  A  tribunal  so  constituted  can  hardly  fail,  soon  or  late, 
to  sink  into  contempt ;  least  of  all  is  it  calculated  to  deal  with 
powerful  corporations.  As  a  direct  consequence  of  this  con- 
spicuous distrust,  these  tribunals  have  almost  invariably  been 
made  up  of  very  inferior  and,  not  seldom,  corrupt  men,  for  no 
such  responsibility  and  prominence  was  thrown  upon  them  as 
forced  out  capacity  and  integi-ity  as  the  only  alternative  to 
failure.  Had  the  same  class  of  appointees,  as  a  rule,  been 
placed  upon  the  bench,  the  judiciary  would  long  since  have 
sunk  into  contempt.  The  duties,  the  responsibilities,  and  the 
characters  of  those  composing  these  boards  should,  on  the 
contrary,  be  brought  up  to  the  highest  standard,  —  to  an 
equality,  in  short,  with  those  of  the  judges  of  our  courts. 
Their  tribunals  should  be  clothed  with  all  necessary  powers 
and  be  put  forward  as  if  the  members  were  fully  competent  to 
represent  the  interests  of  the  State  with  an  experience  and 
ability,  a  knowledge  of  details,  and  a  zeal  in  their  occupatioii 
equal  to  that  ever  so  conspicuously  displayed  by  the  agents 
of  the  corporations.  Such  men  could  certainly  be  found  ; 
the  corporations  always  have  them.  Meanwhile  the  whole 
subject  may  be  summed  up  in  few  words  :  under  a  system 
which  permits  special  legislation,  boards  for  the  regulation  of 
railroads  arc  useless ;  they  are,  however,  indispensable  under 
one  which  confines  itself  to  general  laws. 

It  is  not  impossible  that  the  defective  machinery  in  our 
government,  to  use  once  more  the  simile  originally  employed 
at  the  beginning  of  this  chapter,  may  be  strengthened  in  the 
way  indicated.  A  new  strain  has  been  brought  to  bear.  At 
present  our  government  rKSCupies  the  impossible  position  of 
a  wooden  liner  exposed  to  the  fire  of  modcni  artillery.  It 
was  built  for  no  such  trial.  The  railroad  corporations,  neces- 
sarily monopolists,  constitute  a  privileged  class  living  under  a 
form  of  govenunent  intended  to  inhibit  all  class  legislation. 
Wo  must,  then,  sec  our  government  fail  in  this  unexpected 
crisis,  or  we  must  strengthen  it  in  such  a  manner  as  to  enable 
it  to  vindicate  its  authority.  This  can  only  be  done  through 
human  agency  j  ingenious  statute  machinery,  without  a  man 


THE  GOVERNMENT  AND  THE  RAILROAD  CORPORATIONS.  429 

inside  of  it,  will  only  result  in  certain  failure.  The  other 
course,  also,  naay  fail,  as  the  iron  plates  of  our  monitors  may 
be  crushed  by  the  weight  of  novel  projectiles  ;  but  here,  at 
least,  the  power  of  resistance  can  in  some  degree  be  propor- 
tioned to  the  intensity  of  the  strain. 

The  only  advance  which  has  for  years  been  made  in 
railroad  legislation  was  effected  in  the  direction  indicated  by 
the  legislature  of  Illinois  in  the  first  session  after  the  adoption 
of  the  new  constitution.  Amid  some  legislation  of  very  ques- 
tionable character  and  propriety,  and  which  can  hardly  fail  in- 
juriously to  react  upon  the  reform  desired,  two  laws  were 
enacted  of  great  importance ;  —  by  one  a  board  of  commis- 
sioners was  constituted,  and  by  the  other  a  general  attempt 
was  made  to  classify  roads  and  to  affix  limits  to  the  charges  for 
travel.  It  is  extremely  improbable  that  the  last  act  will  be 
found  perfect  in  its  provisions,  but  it  contains  in  itself  the 
two  great  germs  from  which  an  efficient  regulation  of  roads  by 
law  must  grow  if  the  thing  is  in  any  way  possible ;  —  these 
two  germs  are  the  recognition  of  the  natural  differences  be- 
tween different  railroad  enterprises,  and  the  consequent  dele- 
gation of  a  discretion  in  details  and  administration  to  a  per- 
manent and  competent  tribunal. 


THE     END 


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